Introduction:
i. “Revenue models specifically describe different techniques for generation of income.”
ii. For existing companies, revenue models have revolved largely around the income from sales of products or services.
Types of revenue models:
i. Subscription access to content: A range of documents can be accessed for a period of a month or typically a year. For example, subscription to FT (www.ft.com) for access to digital technology section for around $$80 per year.
ii. Pay-per-view access to documents: Here payment occurs for single access to a document, video or music clip which can be downloaded. It may or may not be protected with a password or Digital Rights Management. For example, I’ve paid to access detailed best practice guides on Internet marketing from Marketing Sherpa.
iii. CPM display advertising on site (e.g. banner ads and skyscrapers): CPM stands for “cost per thousand” where M denotes “Mille”. The site owner such as FT.com charges advertisers a rate card price (for example 50 GBP CPM) according to the number of its ads shown to site visitors. Ads may be served by the site owners own ad server or more commonly through a third-party ad network service such as Google AdSense.
iv. Revenue from CPC advertising on site (pay per click text ads): CPC stands for “Cost Per Click”. Advertisers are charged not simply for the number of times their ads are displayed, but according to the number of times they are clicked. These are typically text ads similar to sponsored links within a search engine but delivered over a network of third-party sites by on a search engine such as the Google Adsense Network. Typical costs per click can be surprisingly high, i.e. they are in the range GBP 0.10 to “‚ GBP 4, but sometimes up to GBP 40 for some categories such as “life insurance” that have a high value to the advertiser. The revenue for search engines or publishers from these sources can also be a fair proportion of this.
Google Network Revenues through Ads generate around one third of Google’s revenue. For me, the Google’s content networks are one of the biggest secrets in online marketing with search engines such as Google generating over a third of their revenue from the network, but some advertisers not realizing their ads are being displayed beyond search engines and so not served for this purpose. Google is the innovator and offers options for different formats of ad units including text , ads, display ads, streamed videos and now even cost per action as part of its pay per action scheme
v. Revenue from Sponsorship of site sections or content types (typically fixed fee for a period) :A company can pay to advertise a site channel or section. For example, bank HSBC could sponsors the Money section on a media site. This type of deal is often struck for a fixed amount per year. It may also be part of a reciprocal arrangement, sometimes known as a “contra-deal” where neither party pays.
A fixed-fee sponsorship approach was famously used by Alex Tew in 2005, a 21-year-old considering going to University in the UK who was concerned about paying off his university debts. This is no longer a concern since he earned $1,000,000 in 4 months when he set up his Million Dollar Homepage.
His page is divided into 100-pixel blocks (each measuring 10×10 pixels) of which there are 10,000 giving 1,000,000 pixels in total. Alex spent £50 on buying the domain name (www.milliondollarhomepage.com) and a basic web-hosting package. He designed the site himself but it began as a blank page.
vi. Subscriber data access for e-mail marketing: The data a site owner has about its customers is also potentially valuable since it can said different forms of e-mail to its customers if they have given their permission that they are happy to receive e-mail either from the publisher or third parties. The site owner can charge for adverts placed in its newsletter or can deliver a separate message on behalf of the advertiser (sometimes known as list rental). A related approach is to conduct market research with the site customers.
vii. Affiliate Revenue (CPA, but not CPC): It is basically commission based. For example, displaying Amazon books on the site abc.com and receive around 5% of the cover price as a fee from Amazon. Such an arrangement is sometimes called as cost per acquisition.
A business model can be defined as follows:
“An architecture for the product, service, and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenue.”
Timmers (1999) identified 11 different types of business model that can be facilitated by the web:
i. E-shop: Marketing of a company or shop via web.
ii. Third-party marketplaces: They are basically electronic B2B marketplaces.
iii. E-procurement: Electronic tendering and procurement of goods and services.
iv. Value chain integrators: Offers a range of services across a value chain.
v. E-malls: A collection of e-shops such as Indigo Square.
vi. Value chain service providers: Specialize in providing value to a specific part of value chain, such as logistics company UPS.
vii. E-auctions: They can be B2C e.g. eBay or predominantly B2B e.g. QXL.
viii. Information brokerage: Provides information for consumers and business, often to assist in making the buying decision or for business operations or leisure.
ix. Virtual communities: These can be B2C communities such as iVillage or B2B communities such as Vertical Net. These are important for their potential in e-marketing.
x. Trust and other services: They authenticate the quality of service provided by companies trading on web. E.g. Internet Shopping is Safe (ISIS) or TRUSTe which authenticate the quality of service provided by companies trading on the web.
xi. Collaboration platforms: They establish collaboration between businesses or individuals. For example e-Groups, now part of Yahoo services.
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