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E-Business models on the basis of Transaction Types | Fundamentals of E-commerce

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e-business models based on transaction typeE-Business models based on the relationship of Transaction Types,
Fundamentals of E-commerce Notes | Sixth Semester,
BSc.CSIT | Tribhuvan University (TU)

Types of e-business models based on the relationship of transaction types
Different types of e-business models can be identified on the basis of transaction types. These transaction take place in a variety of ways. Some of the models type are described below;

1) Brokerage Model
Brokers are market-makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary depending on context. Brokerage models include:

  • Marketplace Exchange: offers a full range of services covering the transaction process, from market assessment to negotiation and fulfillment.
  • Buy/Sell Fulfillment: takes customer orders to buy or sell a product or service, including terms like price and delivery.
  • Auction Broker: conducts auctions for sellers. Broker charges the seller a listing fee and commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. For example eBay.
  • Transaction Broker: provides a third-party payment mechanism for buyers and sellers to settle a transaction. For example Paypal.
  • Search Agent: a software agent or “robot” used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.
  • Virtual Marketplace: It is also called as virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. It may also provide automated transaction and relationship marketing services. For example

2) Aggregator Model
Electronic commerce business model where a firm (that does not produce or warehouses any item) collects (aggregates) information on goods and/or services from several competing sources at its website. The firm’s strength lies in its ability to create an ‘environment’ which draws visitors to its website, and in designing a system which allows easy matching of prices and specifications. Aggregator model includes:

  • Virtual Merchant : This is a business that operate only from the web and offers either traditional or web specific goods and services. The method of selling may be listing price or auction. Some example includes [Amazon, eToys]
  • Catalog Merchant : Catalog business is a migration of mail order to web-based order business.
    Bit Vendor – This is the merchant that deals strictly in digital products and services in its purest form.
  • Subscription model : The users have to pay for the access of the site. High value added content should be essential for subscription model. Some examples are [Wall street journal, Consumer Reports]

3) Info-mediary Model
Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns. Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market. Info-mediary model includes:

  • Advertising Networks : feed banner ads to a network of member sites, thereby enabling
    advertisers to deploy large marketing campaigns. Ad networks collect data about web users that can be used to analyze marketing effectiveness.
  • Audience Measurement Services : online audience market research agencies.
  • Incentive Marketing : customer loyalty program that provides incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising.
  • Metamediary : facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties.

4) Community Model
The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

  • Open Source : software developed collaboratively by a global community of programmers who share code openly. Some examples are Red Hat, Linux.
  • Open Content : openly accessible content developed collaboratively by a global community of contributors who work voluntarily. Examples include Wikipedia.
  • Public Broadcasting : user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations.
  • Social Networking Services : sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. Some example may be Facebook, Orkut.

5) Value Chain Model
Value chain selling is supported through two business models: demand chain and a supply chain; E-Commerce supports the transactions through both the demand chain business model and supply chain business model.

Products, goods, services, or information are delivered through the parties of the value chain from producers to end users. A value chain also has relationship and administrative aspects, that is, you can manage the relationship of the partners or enterprises in your value chain, as well as offer some administrative services to those parties.

As a result, value chain business models must manage the two sides of their businesses: their customers and direct sales, and their channel partners and suppliers. Each requires its own management channels and practices.

To sell directly to customers (direct sales), value chain models usually include a storefront, where customers can purchase their goods or services directly. To manage relationships with partners or suppliers, the demand chain and a supply chain models within the value chain include a hub.

6) Advertising Model
The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content and services like email, IM, blogs mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The advertising model works best when the volume of viewer traffic is large or highly specialized. Advertising model includes:

  • Portal : usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. Some common examples are [Google, Yahoo!]
  • Classifieds : list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee.
  • User Registration : content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns.
  • Contextual Advertising / Behavioral Marketing : For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user’s surfing activity.
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