Identify and compare the revenue model for Google, Amazon.com and eBay

Revenue model can be defined as the technique or method that is adopted by the e-commerce company in generating the business revenue from its website.Basically, there are five types of revenue model which are stated as below:

(1) Sales revenue - Revenue generated by selling of goods, services, and merchandise information provided in the publisher's website.

(2) Transaction fee - Commission earned by the company based on either the volume of successful transaction or fixed fee per transaction successful conducted.

(3) Advertising fee - Fee that is charged by the web publisher company to advertiser, by letting the space in publisher's website to advertise the product in different form of advertisement.

(4) Subscription fee - The users have to pay a fixed amount of fees for subscription of contents or services provided by the website.

(5) Affiliate fee - Fee that earned by the company for referring customers to other websites.


Now we will identify and compare the revenue model for Google, Amazon.com and eBay respectively.


-Google-



Google is the most widely-used web search engine in the world. There are thousands million of internet users all around the world search information via Google search engine everyday. Besides that, it also provides a variety of free of charge internet services such as Blogger (web log), Google Mail (electronic mail) and etc.

Google does not charge any fee on the internet services that it provided for example Gmail, G-talk, but how does it gain huge profit every year? In fact, its revenue model mainly from advertising fee related to its internet services. This consists of about 99 percent of overall revenue. Besides that, Google also earns revenues from sale of its advertising-free version of the internet services. The advertising fees of Google mainly consist of Google Adwords and Google Adsense.

Google Adwords is the main revenue source of Google. It offers pay-per-click (PPC) advertising, and site-targeted advertising for both banner ads and text. Pay-per-click (PPC) advertising means that the advertisers need to pay to Google every time the advertisement received a click. The advertisement is designed to appear beside the search result pages of the Google seach engine in text form. It allows the advertisers to present advertisements to users when the users are searching for information related to what the advertisers have to offer.

Google Adsense is another advertising method adopted by Google. The difference of it is that the website owners (including blogs) can display Google advertisements on their websites and they are able to earn the revenue with Google every time the ads are clicked by visitors while Google Adwords only appear in Google website and the ads-clicked only earned by Google. Website owners of Google Adsense service have the opportunity to display the ads in their websites in various forms such as text, image and video. These ads can generate revenue on either a per-click or per-thousand-impressions basis. However, all the Google Adsense ads are administered by Google.

Google Product Search ( or formerly known as Froogle) is a price comparison service that makes the users easier in searching information and comparing for online product sale. There is a misunderstanding that Google has earned revenue by charging any fees for listings, payment for products to show up or commission on sale. In fact, Google does not do so, but it only earns revenue by Google Adwords to be displayed in Product Search results adjacent to the unpaid results. Currently, Google has started the testing on a new advertising programme called Cost-Per-Action, which is based on cost-per-click model. It differs from Adsense in the way that a site owner can only get the pay whenever a visitor clicks on an ad and conducts a specific action, such as purchasing a product from the advertiser.



-Amazon.com-



Amazon.com is a marketplace where allows sellers to offer their good alongside Amazon's offerings. A website can use a combination of revenue models to generate revenue. Amazon.com is a prime example of the e-commerce model or e-tailing. Amazon generates revenue primarily by selling books, videos, electronics, and kitchen equipment on domestic and international website, such as Amazon Marketplace. However, Amazon is also a pioneer in affiliate partnership marketing. An Amazon partner website can display Amazon books ( and review etc.) directly on their website, and sends customers to the Amazon's website when the visitor is ready to buy it. In turn, Amazon pays a commission for the sale to the site owner.

An e-commerce model is the most well known revenue stream where the website sells products or services online. Every e-commerce entity on the internet should have a business model that performs on the internet.

E-Tailing (electronic retailing) is the selling of retail goods on the internet. E-tailing is synonymous with business-to-consumer (B2C) transaction.Besides sale of goods, Amazon.com also generates revenue through sale of web services, for example Amazon Simple Storage Services (S3), Amazon Elastic Compute (EC2) and etc. Amazon S3 is an online storage web service that provides unlimited storage through a simple web services interface. Amazon EC2 is a commercial web service that allows customers to rent computers on which to run their own computer applications.
Advertising fee is also one of the revenue sources for Amazon.com. It offers a suite of advertising channels for advertisers including online products ads, online display advertising, and Clickriver ads, which ads promote services alongside with Amazon's products.



-eBay-


eBay is an online aution and shopping website. It provides an electronic marketplace for people to buy amd sell various merchandise and servise worldwide. It has millions of transactions listed, bought and sold daily, the items sold including collectibes, decor, appliances, computers, furnishings, equipment, vehicles and others. It has set up localized websites in about thirty countries including Malaysia.

EBay generates revenue by of various fees nand commissions such as insertion fees, promotional fees and final value fees. To start with, eBay charged an insertion fees based on the openning price of the merchandise.

-Insertion fees ~ when an item listed on eBay, this nonrefundable fee is charged.

-Promotional fees ~ an extra fee that charged for additional listing options which can enhance the advertising and promotion of an item, such as highlighted or bold listings.

-Final value fees ~ the commissions that charged to the seller at the end of the auction.Besides that, eBay earns transaction fee from owning paypal, an online paying service system for users to buy items online more conveniently. Ebay also gains sales from the service of listing customer's product to be sold to other users as well as some advertisement fee. Ebay's revenue increases with seller surplus. Its liquidity promotes a lock in, which keeping current customers happy and acquires new customers.

In conclusion, Google, Amazon.com and eBay have proved that every e-commerce comany would adopt different method of revenue models in its own way. Google relies mostly on advertising fees and small portion of sales. Amazon.com gains mostly on sale of products and services and relatively small amount in advertising and transaction fees while eBay mainly on transaction fees.






References:
http://en.wikipedia.org/wiki/Adsense
http://en.wikipedia.org/wiki/Amazon_Marketplace
http://en.wikipedia.ord/wiki/Ebay

An example of an E-Commerce failure and its causes

An example of failure in e-commerce is Pets.com. Pets.com attempted to sell pet accessories and supplies directly to the customer over the web

Pets.com was launched in November 1998 by Greg McLemore. Then it was purchased by a venture capitalist firm in early 1999. Amazon.com backed Pets.com raised $82.5 millions in an IPO funds in February 2000. However, Pets.com was gone into liquidation in November 6, 2000.

Lack of experience in management and poorly constitute business plan led to downfall of Pets.com. Company has raised multimillion-dollar in just advertisement fees. Besides that, the CEO and management department had little or no experience in running the business. Moreover, because the company had to undercharge for shipping costs to attract customers, it actually was loosing money on every shipment it made.

Furthermore, the information of Pets.com was insufficient. Customer just can view the photo of the pets but cannot touch the pet by themselves via internet. This makes them loss confident to trust on the quality and healthy condition of the pet. If customer really wants buy the pet or the accessories for pet, Pets.com was never able to give customer confirm days the pet can deliver, a customer had to wait a few days to actually get the pet or accessories for pet.

It is very important to know the demand and needs of customer as to satisfy customer service to the customer but Pets.com fail to do this; this causes Pets.com failure in e-commerce.

After see the failure of e-commerce, we must do a lot of strategic planning before implementing e-commerce.

Reference:
http://www.cnet.com/1990-11136_1-6278387-1.html?tag=feat.2

The history and evolution of E-commerce

In the beginning, the Earth was without form, and void; and darkness was on the face of the deep. Telegraph (demonstrated in 1884) spread with railroads in the mid 1800’s then Transatlantic Cables from 1857 to 1866. Until very recently, only computer people had computers started to change in the 1980’s and paradigm shift in 1995 – the World Wide Web (www). The history of this cast improving system is how information technology has transformed business processes into how it is today.

In order to prove that the best paradigm would be shopping, which I am sure is a popular method for relaxing notwithstanding women or men and could be done anytime, anywhere, even in your pyjamas! Now this brings us back to the invention of the very old notion of ‘buy and sell’ electricity, cables, computers, modems and the internet of course! Started in 1991, it was made possible to do shopping online and since then, hundreds and thousands of business started to venture into this promising approach - the E-commerce.

The meaning of electronic commerce has changed over the last 30 years. Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK. Online shopping was invented in the UK in 1979 by Michael Aldrichand during the 1980s it was used extensively particularly by auto manufacturers such as Ford, Peugeot-Talbot, General Motors and Nissan. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing.

We can’t run away from sites like Amazon.com and Ebay when talking about e-commerce. They are one of the first few internet companies to allow electronic transactions and succeed. Nowadays, the 5 largest and most famous worldwide Internet retailers are Amazon, Dell, Staples, Office Depot and Hewlett Packard. According to statistics, the most popular categories of products sold in the World Wide Web are music, books, computers, office supplies and other consumer electronics.

Lastly, e-commerce is a history of a new, virtual world which is evolving according to the customers’ advantage. The evolution of this will never end. As long as technology breaths in the air, it will continue improving for the better. E-commerce has come a long way, evolving from organizations billboards to a fully functional personalized shopping experience. Although the road was bumpy from 1994-2004, it has now become a crucial part of Internet pioneers and technology innovators.


In conclusion, e-commerce today is still at its infancy. Invisible shopping carts, annoyance-free assistance and no lines at the register and many more benefits awaits the future of e-commerce. There is a bright future for it. Besides narrowcasting, there are also services like new quantum processors that will increase the speed of computers twice as fast and HDTV’s popularity allows us to surf and shop on their television sets.






Here are the summary of years and trends for the evolution of e-commerce...



* 1984- Electronic Data Interchange or EDI was standardized through ASCX12. This guaranteed that companies would be able to complete transactions with one another reliably.

* 1992- Compuserve offers online retail products to its customers. This gives people the first chance to buy things off their computer.

* 1994- Netscape arrived. Providing users a simple browser to surf the internet and a safe online transaction technology called as Secure Sockets Layer.

* 1995- Amazon and Ebay were the 1st international companies that implemented electronic transactions.


* 1998- DSL,or Digital Subscriber Line, provides fast, always-on internet service to subscribers across California. This prompts people to spend more time and money to online.


* 1999- Retail spending over the internet reaches $20billion according to the Business.com


* 2000- The US government exended the moratorium on internet taxes until at least 2005.






References:

http://www.ecommerce-land.com/history_ecommerce.html

http://www.ecommercedevelopment-web.com/ecommerce-blog/62-history-of-e-commerce.html

http://en.wikipedia.org/wiki/Electronic_commerce

An example of an E-commerce success and its causes

Amazon.com Incorporated is an American e-commerce company located in Seattle, Washington. Amazon was a company that sells goods through internet. Amazon.com nowadays is very successful because there are many types of product are selling in Amazon.com such as books, computer’s accessories, sports tools and even jewellery also sell in Amazon.com. Besides there is a box writing search is for customer to find a specific goods faster and conveniently.

By the way, Amazon.com know all the customer profile after the customer fill the register form but there is without invading customer privacy. In other words, Amazon.com also will suggest books and products that might interest the customers based on the purchasing behavior of customer so the customers will never get a bunch of junk mail from Amazon.com that is out of topic. It is a form of permission marketing that greatly respects the customer and their privacy.

Amazon.com differentiates itself by making sure that is offers the same quality of products as any other company with noticeably lower price. In additional, customers do not have to pay sales taxes when they purchase in Amazon.com. After customers click the goods they want they just pay the cost of the product and shipping cost by amazon.com saving credit card then the goods will deliver to customer’s house.

In fact, Amazon has build up trust because there always deliver order on time to their customers. Amazon always make improvement to increase the company’s stocking and shipping capabilities and reduced the time it took to fill customer’s order. Lastly is there are also some of the goods will have discount, so that customer will buy it.

In conclusion, Amazon are very successful today is because oh its straightforward web design and friendly interface, and most important is the unique shopping experience. Therefore, Amazon is able to develop an extremely loyal customer base.