Business Models Entry 1a

A Business Model is a conceptual framework that defines how a company creates, delivers and captures value by specifying where it is positioned in the value chain. An internet business model as defined by Roberts and Zahay (2013),  are how enterprises are configured to create value for customers and deliver that value in a profitable way on the internet. Value is generated from customer’s wants and needs. To deliver value businesses need to understand these needs and design products and services that satisfy those needs and align with its core expertise.  There are nine types of internet business models including Brokerage, Advertising, Infomediary, Merchant, Manufacturer, Affiliate, Community, Subscription and Utility. The Affiliate and Community model will be discussed.

An Affiliate Model offers products and services that visitors are possibly interested in purchasing, wherever they may be surfing. The affiliated partner site is offered financial incentives in the form of a percentage. Pay is linked to performance. If the affiliate site does not generate sales, there is no associated cost to the Merchant. For example if you are on a celebrity gossip site and you frequently visit/ purchase from ASOS.com, products from ASOS are constantly provided on the celebrity gossip site. Amazon.com extensively utilizes this model ‘to help individual websites link to specific products Amazon offers’ (Duff, n.d.).Variations of the Affiliate model include Banner exchange, pays per click and Revenue Sharing.

Community Model The functioning of this model is based on user loyalty. This model can be business to business or business to consumer, but has been successful as a consumer to consumer model. Users highly invest their time and emotion on such sites. Revenue is generated through sale of core necessary products and services, voluntary contributions; or revenue through contextual advertising and subscriptions for premium services. For example WordPress.com a blogging site, the basic blog is free but to get more features like customisation tools, your own blog address, privacy protection etc a fee is charged. Types of Community models include:

  • Open Source which is a software developed by programmers from around the world who share code openly. Revenue is generated from related services like ‘systems integration, product support, tutorials and user documentation’ (Rappa, 2010). Example Red Hat
  • Open Content- Content is collaboratively contributed from a global community, who voluntarily work. Example Wikipedia
  • Social Networking services- that connect people who have a defined common interest such as hobby, profession, romance etc. Social networking sites provide opportunities for contextual advertising and a charge for premium services. Example Orkut, Friendster, Facebook.

References

Duff, V n.d. Internet-Based Business Models Definition, Chron, viewed 30 August 2014, http://smallbusiness.chron.com/internet-based-business-models-definition-909.html.

Rappa, M 2010, Business Models on the Web, Managing the Digital Enterprise, viewed 31st August 2014, http://digitalenterprise.org/models/models.html.

Roberts, M  Zahay, D 2013, Internet Marketing: Integrating Online and Offline Strategies, South Western Cengage Learning, viewed 31st August 2014, http://books.google.com.au/books?id=6doKAAAAQBAJ&pg=PA78&dq=Internet+marketing+Business+Models&hl=en&sa=X&ei

=gwIDVIqrFc7d8AXTnoH4Ag&ved=0CDEQ6AEwAA#v=onepage&q=Internet%20marketing%20Business%20Models&f=false.

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