Selling on the Web: Selling on the Web: Revenue Models and Revenue Models and Building a Web Building a Web Presence

Revenue Models and Building a Web Presence

 

Revenue Models

  • Web business revenue generating models
    • Web catalog
    • Digital content
    • Advertising-supported
    • Advertising-subscription mixed
    • Fee-based
  • Can work for both sale types
    • Business-to-consumer (B2C)
    • Business-to-business (B2B)
  • Can work with one Web site, separate sites, or separate pages

 

Web Catalog Revenue Models

  • Creates additional sales outlet
  • Payment though Web site, telephone, or mail
  • Order through Web site or telephone
  • Web sites expand traditional model
    • Replace or supplement print catalogs
    • Offer flexibility
  • Mailed to prospective buyers
  • Adapted from traditional catalog-based model, in which
    • Seller established brand image
    • Sold through printed information
  • Luxury goods
    • Clients are reluctant to buy through Web
    • Vera Wang and Versace
  • Web sites provide information
  • Shopper purchases at physical store
  • Heavy use of graphics and animation
    • Evian
  • Uses flash animation
    • Tiffany & Co
  • Graphics and animation require broadband connection

 

Digital Content Revenue Models

  • Highly efficient distribution mechanism
    • Firms own written information or information rights
  • ProQuest: sells published documents’digital copies
  • Dow Jones newspaper publisher subscriptions
    • Digitized newspaper, magazine, and journal content
  • Sellers of adult digital content
  • Association for Computer Machinery (ACM): digital library
    • Pioneered online credit card payment processing

 

Advertising-Supported Revenue Models

  • United States network television
    –Provides free programming and advertising
    messages
  • Supports network operations sufficiently
  • Site visitor views problem (measuring and
    charging)
    –Stickiness
  • Keeping visitors at site and attracting repeat
    visitors
  • Exposed to more advertising in sticky site
  • Obtaining large advertiser problem
    –Demographic information
  • Characteristics set used to group visitors

 

Categories of Advertising-Supported Revenue Models

  • Web portals
  • Newspaper publishers
  • Targeted classified advertising sites
    –More successful at generating adverting revenue

 

Advertising-Subscription Mixed
Revenue Models

  • Subscribers
    –Pay fee and accept advertising
    –Typically less advertising
  • Compared to advertising-supported sites
  • Web sites offer different degrees of success
    –The New York Times (today)
  • Bulk of revenue derived from advertising
    –The Wall Street Journal (mixed model)
  • Subscription revenue weighted more heavily
    –Print edition and online editions
  • Different model versions

 

Fee-for-Transaction Revenue Models

  • Service fee based on transaction number or size
  • Web site offers visitor personal service
    –Formerly, human agents provided service
  • Value chain
    –Disintermediation
  • Intermediary (human agent) removed
    –Reintermediation
  • New intermediary (fee-for-transaction
    Web site) introduced
  • Travel agents
    • Receive fee for initiating transaction
    • Replaced by computers
  • Automobile sales
    –Web site removes salesperson negotiation
    •Reduces costs
    •Provides buyers information service
  • Stockbrokers
  • Insurance brokers
  • Event tickets
    –Event promoters use Web
    •Ticketmaster, Tickets.com, Ticket Web
    •Sell original tickets
    •Customers reside anywhere worldwide
  • Real estate and mortgage loan brokers
    –Web sites provide all traditional broker services
  • Online banking and financial services
    –No physical product
    •Easy to offer on Web
    –Web financial transactions concerns
    •Trust and reliability of financial institution
  • Online music
    –Amazon MP3, Apple’s iTunes, eMusic, Microsoft’s MSN Music, Yahoo
    –Sales revenue source
    •Fee-for-transaction model
    •Some sites offer subscription plans

 

 

Online Video

  • Copying control
    • Use DRM software
  • Three issues hampering sales
    • Large file size
      • Reduced by higher Internet connection speeds
    • Fear of online sales impairing other sales types
      • Potential serial release pattern impact
    • Inability to play on variety of devices
      • DRM not platform compatible

 

Fee-for-Service Revenue Models

  • Companies offer Web service
    • Fee based on service value
      • Not broker service
      • Not based on transactions-processed number
        or size
  • Online games
    • Sales revenue source
      • Advertising (older concept)
      • Pay-to-play premium games
      • Subscriptions
    • Frequent player demographics
      •40% over age 35
  • Professional services
    • Limited Web use
      • State laws prohibit extension of practice
      • Patients may set appointments
    • Major concern
      • Patient privacy
    • Significant barrier
      • Patient diagnosis difficult without physical examination

 

Revenue Models in Transition

  • Need to change revenue model
    • When Web users’needs change
  • Conditions after 2000
    • Funding became scarce
      • Unprofitable growth phase
    • Change model or go out of business

 

Subscription to Advertising-Supported Model

  • Slate magazine (e-zine): Upscale news and current events
  • Success expectations were high
    • Experienced writers and editors
    • Acclaim for incisive reporting and excellent writing
  • Initial revenue source: Annual subscription
    • Did not cover operating costs
  • Now an advertising-supported site
    • Part of MSN portal
      • Increases stickiness

 

Advertising-Supported to Advertising-
Subscription Mixed Model

  • Salon.com
    • Acclaim for innovative content
  • Initial revenue source
    • Advertising-supported site
    • Needed additional money to continue operations
      • Investors did not provide
  • Now offers optional subscription version
    • Annual fee for Salon premium
      • Free of advertising
      • Downloadable content
      • Additional content

 

Advertising-Supported to Feefor-
Services Model

  • Xdrive Technologies: Free disk storage
  • Initial revenue source (1999)
    • Advertising-supported
      • Pages contained advertising
      • Targeted e-mail advertising
      • Did not cover operating costs
  • Now subscription-supported service
    • Monthly fee dropping
  • Other similar companies (IBackup and Kela

 

Advertising-Supported to Subscription Model

  • Northern Light
    • Search engine (includes own database)
      • Results include Web site links and abstracts
  • Initial revenue source
    • Combination (advertising-supported and fee-based)
      • Individual article payment
      • Search results page advertising
    • Did not cover operating costs
  • Now subscription model
    • Annual, large clients

 

 

Multiple Transitions

  • Encyclopedia Britannica
    –Initial Web offerings
    •Britannica Internet Guide
    •Encyclopedia Britannica Online
  • Initial revenue source
    –Paid subscription site
    •Low subscription sales
    –Converted to free advertiser-supported site
    •Sold educational and scientific products
  • Returned to mixed model
    –Subscription plan and free content

 

Revenue Strategy Issues

  • Implementations issues
    –Channel conflict and cannibalization
    –Strategic alliances and channel distribution management
    –Mobile commerce

 

Channel Conflict and Cannibalization

  • Channel conflict (cannibalization)
    –Company Web site sales activities interfere
    with existing sales outlets
  • Retail distribution partner issues
    –Levis: stopped selling products on company
    Web site
    •Site now provides product information
    –Maytag: incorporated online partners into Web
    site
    •Site now provides product information

 

Strategic Alliances and Channel Distribution Management

  • Strategic alliance
    –Two or more companies join forces
    •Undertake activity over long time period
    –Joining Web sites with channel
    distribution management firms
  • Amazon.com
    –Joined with Target, Borders, CDnow,
    ToyRUs

 

Mobile Commerce

  • Few companies successful generating
    significant revenues
    –NTT’s DoCoMo I-Mode service (Japan cell phone)
    •Send short messages, play games, obtain
    weather forecasts
  • Mobile commerce: $400 billion by 2012
    –Requires larger memory, easier-to-use
    interfaces, higher screen resolutions
    •E-mail, telephone, Web access,
    entertainment services convergence

 

Creating an Effective Web Presence

  • Organization’s presence
    –Public image conveyed to stakeholders
    –Usually not important
    •Until growth reaches significant size
    –Stakeholders
    •Customers, suppliers, employees, stockholders, neighbors, general public
  • Effective Web presence
    –Critical even for smallest and newest
    Web operating firms

 

 

Identifying Web Presence Goals

  • Business physical space
    –Focus on very specific objectives
    •Not image driven and must satisfy many business needs
    •Usually fails to convey good presence
  • Web business site intentionally creates
    distinctive presence
  • Good Web site design
    –Provides effective image-creation features
    –Provides effective image-enhancing features
  • Making Web presence consistent with brand
    image
    –Different firms establish different Web presence goals
    –Coca Cola pages
    •Usually include trusted corporate image (Coke bottle)
    •Traditional position as a trusted classic
    –Pepsi pages
    •Usually filled with hyperlinks to activities      and product-related promotions
    •Upstart product favored by younger          generation

 

Achieving Web Presence Goals

  • Effective site creates attractive presence
    –Meets business or organization objectives
  • Objectives
    –Attract visitors to the Web site
    –Make site interesting
    –Convince visitors to follow site’s links
    –Create impression consistent with organization’s desired image
    –Build trusting relationship with visitors
    –Reinforce positive image
    –Encourage visitors to return

 

Web Site Usability

  • Current Web presences
    –Few businesses accomplish all goals
    –Most fail to provide visitors sufficient interactive contact opportunities
    –Improve Web presence
    •Make site accessible to more people
    •Make site easier to use
    •Make site encourage visitors’trust
    •Develop feelings of loyalty toward
    organization

How the Web Is Different

  • Simple mid-1990s Web sites
    –Conveyed basic businesses information
    –No market research conducted
  • Web objective achievement success
    –Sites create organization’s presence
    –Sites contain standard information set
    •History, objectives, mission, product
    information, financial information, two     way meaningful communication

 

 

Meeting the Needs of Web Site Visitors

  • Successful Web businesses:
    –Realize every visitor is a potential customer (partner)
  • Crafting Web presence is an
    important concern
    –Know visitor characteristic variations
  • Visitor at site for a reason
  • Web site visitor motivations
    –Learning about company products or services
    –Buying products or services
    –Obtaining warranty, service, repair policy information
    –Obtaining general company information
    –Obtaining financial information
    –Identifying people
    –Obtaining contact information
  • Visitors have:
    –Various needs, experience, expectations,
    technology
  • Making Web sites accessible
    –Build interface flexibility
    •Optional to use frames
    •Offer text-only version
    •Option to select smaller graphic images
    •Option to specify streaming media connection type
    •Option to choose among information attributes
    –Controversial Web site design
    •Animated graphics software use
    •Some tasks lend themselves to animated Web pages
    –Offer multiple information formats
    –Web site constructions goals
    •Offer easily accessible organization facts
    •Allow different visitor experiences
    •Provide meaningful, two-way communication link
    •Sustain visitor attention and encourage return visits
    •Offer easily accessible information about products, services, and their use

 

 

Trust and Loyalty

  • Creates relationship value
  • Good service leads to seller trust
    –Delivery, order handling, help selecting product,
    after-sale support
  • Satisfactory service builds customer loyalty
  • Customer service in e-commerce sites
    –Problem
  • Lack integration between call centers and Websites
  • Poor e-mail responsiveness
    –Unlikely to recover money spent to attract
    customers

 

 

Connecting with Customers

  • Important element of a corporate Web presence
  • Identify and reach out to customers
  • Nature of Web communication
    –Personal contact (prospecting)
  • Employees individually search for, qualify,
    contact potential customers
    –Mass media
  • Deliver messages by broadcasting
    –Addressable media
  • Advertising efforts directed to known
    addressee
    –Internet medium
  • Occupies central space in medium choice
    continuum