E-Commerce

Revenue model is a description of how the organization will earn revenue, produce profits, and produce a superior return on invested capital. 5 major revenue models nowadays are sales, transaction fees, subscription fees, advertising fees, affiliate fees, and other revenue sources.

- GOOGLE -

The main source of Google’s revenue is from advertising. Google's revenue model aims at increasing the visibility and traffic of its small business partners, streamlining their marketing costs, qualifying their leads and helping track returns on investment. Google's revenue model includes Google AdWords, Pay per Click Advertising, Google AdSense, Froogle and their latest advertising program which is Cost per Click model.

90% of Google's revenue is generated by Google AdWords. Google AdWords is a pay per click advertising program that is designed to allow the advertisers to present advertisements to people at the instant the people are looking for information related to what the advertiser has to offer. As such, the role of AdWords in Google’s growth is very important.

Pay per Click Advertising: Pay-Per-Click (PPC) is the best way to send immediate, targeted traffic to your website. It is an online advertising payment model in which payment is based onqualifying click-throughs. An advertiser has to pay every time his ad receives a click. This function is a very useful function and will continue to bring about an increase in income especially if the number of people clicking on these ads increase.

Googles’s another revenue model, AdSense is an ad serving program. Website owners can enroll in this program to enable text, image and, video advertisements on their sites. This has same concept as pay per click, advertisers are required to pay Google a fee for each time a user clicks on the advertisement.

Froogle is a service from Google that makes it easy to find information about products for sale online. Froogle is a price engine website launched by Google Inc. Froogle is different from most other price engines in that it neither charges any fees for listings, nor accepts payment for products to show up first. Also, it makes no commission on sales.

Google is currently testing a new advertising program that pays site owners based on a Cost-Per-Click model. The program, called Cost-Per-Action, is differ from AdSense ads in that a site owner gets paid whenever a visitor clicks on an ad and performs a specific action, such as purchasing a product from the advertiser.

- EBAY-
EBay is an online auction and shopping website in which people and businesses buy and sell goods and services worldwide. EBay generates revenue by way of various fees and commissions, such as insertion fees, promotional fees, and final value fees. To start with, eBay charged an insertion fee based on the opening price of the merchandise.

-Insertion fees: When an item listed on EBay, this nonrefundable fee is charged.
-Promotional fees: Fees that charged for additional listing options that help attract attention for an item, such as highlighted or bold listings.
-Final value fees: Commission that charged to the seller at the end of the auction.

Ebay earns transaction fee from owning paypal, an online paying service system for users to buy items online more conveniently. Ebay also gains sales from the service of listing customer’s product to be sold to other users as well as some advertisement fee. EBay's revenue increases with seller surplus. Its liquidity promotes a lock in, which is keeps current customers happy and acquires new customers.

- AMAZON.COM -

Amazon.com is a marketplace where allows sellers to offer their good alongside Amazon’s offerings. A website can use a combination of revenue models to generate revenue. Amazon.com is a prime example of the e-commerce model or e-tailing. Amazon generates revenue primarily by selling books, videos, electronics, and kitchen equipment on domestic and international Web sites, such as Amazon Marketplace. However, Amazon is also a pioneer in affiliate partnership marketing. An Amazon partner website can display Amazon books (and reviews etc.) directly on their website, and sends customers to the Amazon's website when the visitor is ready to buy it. In turn, Amazon pays a commission for the sale to the site owner.

An e-commerce model is the most well known revenue stream where the website sells products or services online. Every e-commerce entity on the internet should have a business model that performs on the internet.

E-tailing (electronic retailing) is the selling of retail goods on the Internet. E-tailing is synonymous with business-to-consumer (B2C) transaction.

After I have done those researches about revenue model for Google, Amazon.com and eBay as well as comparing these 3 businesses revenue model, I found that each business unit is focused on different revenue model.

- E-commerce model / e-tailing : Amazon.com (www.amazon.com)

- Advertising-based : Google (www.google.com)

- Fee per transaction : eBay (www.ebay.com.my)