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.

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E-commerce success and its causes

When we talk about successful E-commerce today, two best examples which will automatically come to everyone's mind are eBay and Amazon. But today I'll like to choose eBay and look into detail so that it will be more easier gain understanding . eBay is an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. A majority of the sales take place through a set-time auction format, but subsequent methods include a substantial segment of listings in the "Buy It Now" category. In addition to its original U.S. website, eBay has established localized websites in thirty other countries. First of all, let me show you how the homepage basically looks like. You may also log on to http://www.ebay.com/ to find out more about eBay.

This is the main page of eBay website.

You can choose which category you would like to look into.

For example : Books
After you click on the category that you are interested, more categories within it will come out.

After showing you how the website actually works, I'm sure you'll have better understanding on eBay. So, now let us look at eBay's history, It was founded in September 1995, It has a global presence in 37 markets, including the U.S , 233 million registered users worldwide. It has 233 million registered users worldwide. Its marketplaces net revenue for first quarter 2007 totaled $1.25 billion, with 49% from US operations and 51% from our International business. eBay users worldwide trade more than $1.839 worth of goods on the site everyday second. Approximately 1.3 million sellers around the world use eBay as a primary or secondary source of income. September 2006, eBay members worldwide have left more than five billion feedback comments regarding their eBay transactions.

Why eBay came up to be so success ?

• The main reason eBay can be so success today is because they offers an exciting feature which provides buyers and sellers a quick, easy, and safe way to negotiate price online. It helps consumers to bargain for the best price on .This would probably build customer satisfaction as to bid desired item at reasonable price. eBay extensively offers products in different categories such as collectible, vehicles, real estate, office equipment and others. It has a safe and reliable reputation protected by the company.

• eBay has good strategies in terms of web site design, customer services, technical proficiency, advertising, accuracy of billing and guarantees and warranties. All these affords that eBay made can probably satisfy small and large consumers. Talented workforce, product innovation, brand name and expertise in technology are the strength that eBay has in order to survive in this competitive market.

• eBay always put customer satisfaction at the first place. They'll always have guidelines and tutorials for new customers, how to sell: http://pages.ebay.com/bestoffer/seller/index.htmlhow to buy: http://pages.ebay.com/bestoffer/buyer/index.html

• Other than the tutorials, eBay also provides various online help features which can help consumers and assist them when they have problems . The online help features includes help topics, learning center, resolution center, eBaY university and customers may contact them as well. eBay has considerate to the consumers situation and provides a lot of guidelines for them to refer and since then build up consumers network and satisfaction accordingly.

• eBay's website itself has also attracted many customers. Customers can easily find the instructions that they probably need to refer when they have problems . The layout of the website looks tidy , simple but not complicated . The guarantees and warranties which provided by ebay has build up customers confidence and trustworthy.

Sources :

http://www.slideshare.net/lars.schmidl/strategic-evaluation-of-ebay

http://pages.ebay.co.uk/aboutebay/thecompany/companyoverview.html

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The History and Evolution of E-commerce

The transaction of goods and services online by businesses and consumers is called e-commerce. It can be divided into three sub-categories which are B2B (Business to Business), B2C (Business to Consumer) and C2C (Consumer to Consumer). One of the most popular activities on the web is shopping. You can shop on your leisure, at anytime and anywhere as you like.

History of e-commerce started off with the invention of the very old notion of ‘sell and buy’. E-commerce became possible in 1991 when the internet was opened to commercial use. After the success of websites like Amazon, E-bay and Netscape, everybody wanted to start an internet business. Since then many businesses were traded online using World Wide Web.

With the help of leading technologies such as Electronic Data Interchange (EDI) and Electronic Fund Transfer (EFT), it provides an opportunity for users to exchange business information and do electronic transactions. Thus, these allowed business companies and organizations to send commercial documentation electronically. For example, banks have been using EFT for account exchange information over private communication networks. EDI occurs when business transmits computer-readable data in a standard format to another business.

E-commerce has evolved from online billboards to a fully functional and personalized shopping experience over the past decade. The 3C of first generation e-commerce: Content, Community, and Commerce have now evolved into 7C of second generation e-commerce: Content, Community, Commerce, Communication, Connectivity, Collaboration and Customization.

B2C models have been tried and tested during the first generation of e-commerce, but the newer trends are toward B2B as it provides advantage of close integration and communication with partners and suppliers. On the other hand, e-commerce strategy should include Customer Relationship Management (CRM) to help retain customers on a long-term basis. Besides that, security of e-commerce site remains a big concern for corporations and policies must be implemented to protect business strategy that relies heavily on technology. As a result, one of the most lucrative career paths is in the field of information security.

In a nutshell, e-commerce is a helpful technology which are at their peak and is predicted to grow even more. We as the consumers and internet users are responsible to keep it safe so that e-business can be more reliable in the future.

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E-Commerce Failure and its causes

From this week onward we will have weekly titles for the blog, as part of our group, I am responsible for E-Commerce Failure and its causes.

In my daily life, I have the habit of purchasing goods online. Although there it provides convenience but disadvantages accompanies it. I found that the delivery process is upmost troublesome. It’s time-consuming and costly. If we buy thing in supermarket, it’s on cash on delivery system whereby online transaction have time-slack problem. After the payment, I have to wait few days only get the goods. Moreover, buyer normally needs to bare the delivery cost, the cost make the goods become more expensive. Sometimes I feel that is not worth to purchase online.

I have read though some article about the E-Commerce Failure and its causes. I found out that publicity of a company is rather important as a way of communication of the company with the public or rather provides brand awareness in the market. Advertisement, as one of the method of publicity is much focused for E-companies mainly because it needs to have internet traffic into the particular website to operate.

However, one of the main causes of failure is due to advertisement investment done by the companies. Overinvestment in advertisement is the main reason of several dot.com flops such as Pets.com.

Delivery problems prove another critical issue to be dealt with E-Commerce. Customer base of these online services will be rather wide in geographic locations. Delivery cost and time would be crucial to provide competition with local competitors such as shops and hypermarkets. Compared to its advantage of convenience, its cost of shipping would reduce consumer incentive to purchase online. Nevertheless its shipping time would be a disadvantage for many products for example pet litter sold by Pet.com. Urgent necessities would not be delightful to be delivered late to consumers. Another obvious example is from Kozmo.com, which operated well and were optimistic about their future, but failed to see delivery cost as an important factor to the operation of business.

Many other factors such as mismanagement, overly rapid expansion and so on would cause E-Commerce Failures. Therefore, companies operating E-Commerce would require extra attention to the above matters.

Everything has its pros and cons; we have to balance it ourselves. Before “shopping “online we should consider the consequences.

References

http://http//www.cnet.com/1990-11136_1-6278387-1.html?tag=feat.2

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