Revenue Model of Google, Amazon.com, and eBay

Hi there, I am here again to continue our discussion on e-commerce. Well we all know about Google, Amazon.com and eBay, these are the famous link sites which are very successful today and they generate billion of profit every year. How can they be so successful? What are the methods they used?

Basically, revenue model is a description of how the organization will earn revenue, produce profits, and produce a superior return on invested capital. Every organization has its own revenue model to generate income from the website.

Google’s Revenue Model
Google's revenue model includes Google AdWords, Pay per Click Advertising, Google AdSense, Froogle, GoogleAnswers and their latest advertising program which is Cost per Click model. It earns most of its revenue by allowing other website owners to advertise on their search result pages or by placing these same text ads (AdSense) on other sites based on relevance.

Google AdWords – This advertisement function plays a very important role in Google’s growth as 90% of Google's revenue is generated by Google AdWords. It is a pay per click advertising program which allows web advertisers to present advertisements to people at the instant the people are looking for information related to what the advertiser has to offer.

Pay per Click Advertising (PPC) - It is an online advertising payment model in which payment is based on qualifying click-throughs. An advertiser has to pay every time his advertisement receives a click. The Advertisers decide the keywords relevant to their offer that should display their advertisement and the maximum amount they are willing to pay per click for that keyword. This method is quite useful as income will increase if the number of people clicking on these advertisements increase. However, someone could just simply manipulate the search result and generate higher profit. As such, Google should deal with this kind of fraud properly.

AdSense – this is another advertisement program run by Google. Website owners can enroll in this program to enable text, image and, video advertisements on their sites. Revenue is generated on a per-click or per-thousand-ads-displayed basis and the ads are administered by Google. AdSense program includes AdSense for search and AdSense for content. Google advertisers are required to pay Google a fee each time a user clicks on one of their ads displayed on Google Network members’ web sites

eBay’s Revenue Model

eBay is an online auction and shopping website in which people and businesses buy and sell a broad variety goods and services worldwide. Much of eBay’s growth is tied to huge new product categories. It earns transaction fee from owning paypal, an online paying service system for users to buy items online more conveniently as well as advertising fees. Their main sources of revenue is from fees charged to list items up, picture service fees, listing upgrade fees, final value fees and reservation fees.

Fees charged to list items up - For listing of regular items, eBay charges a fee which serves as a starting price.

Picture service fees - The first picture uploaded in its site is free but the subsequent pictures incur fees.

Listing upgrade fees - It provides various services to help its users to enhance their advertising or promotion of products but for a fee of course.

Final value fees - It is charged when there is a closing bid.

Reservation fees – It is only charged if the item listed is not sold.

Amazon.com’s Revenue ModelAmazon.com uses sales revenue model and transaction fee revenue model. Amazon Marketplace is Amazon.com’s fixed price online marketplace that allows sellers to offer their goods alongside Amazon’s offerings. Buyers can buy new and used items sold directly by a third party through Amazon.com using Amazon Marketplace. This sales strategy and program has been very profitable for Amazon.com. Amazon charges a commission rate based on the sale price, a transaction fee, and a variable closing fee.

In addition, Amazon.com also generates revenue by using Affiliate revenue model. Amazon was one of the first online businesses to set up an affiliate marketing program. AStore is an Amazon.com affiliate product which website owners can use to create an online store on their site. The store does not allow website owners to sell their own products directly. Website owners pick products from Amazon’s store and earn referral fees on the products purchased by their readers. The fee structure is currently the same as for the other affiliate links and ranges from 4% to 10% of the product price.