Identify and compare the revenue model for Google, Amazon.com and eBay.

Nowadays e-commerce is the most popular business trend, where the products and services sells through online. Therefore, billions of websites on the internet and about 30 million domain names are registered. But how many of the websites are making profit? In the decade, Google, eBay and Amazon.com have become huge big e-commerce merchants and leading the e-market. How do they make the profit?

There are 5 types of revenue model was established in generating income from website.

1) Sales
2) Transaction fees
3) Advertisement fees
4) Subscription fees
5) Affiliate fees

Google

The main source of Google’s revenue is from advertising. For the 2006 fiscal year, the company reported US$10.492billion in total advertising revenues and only US$112million in licensing and other revenues.


Google AdWords – This is a pay per click advertising program. It allows the advertiser to present advertisements to people at the instant the people are looking for information related to what the advertiser offered. When a user searches Google’s search engine, ads for relevant words are shown as "sponsored link" on the right side of the screen, and sometimes above the main search results.

Google AdSense - It is also a form of advertising. Website owners can enroll the program to enable texts and vidoes' advertisements. This has same concept as pay per click. Advertisers are required to pay Google as each time a user clicks on the advertisement.


eBay

eBay popularized the auction format listing. Like most auction companies, eBay allows people to post somethings in the website and sell them to others who are interested. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services. In other words, eBay generates its revenue through transaction fees by using online auction business model.


eBay offers several types of auctions such as below:

1. Auction-style
2. Fixed Price format
3. Dutch Auctions




Amazon.com
Amazon.com generates their income through sales of goods. People can buy mp3, books, notebook, camera and other goods which offered by Amazon.com. Besides that, buyers can also get the product's specification, details of the product, ratings of the product or even the feedback of other buyers in the website in order to make the right choice. Amazon.com also generates revenues by Affiliate revenue model. Amazon is one of the first online businesses to set up an affiliate marketing program. AStore is an Amazon.com affiliate product which website's owners can use to create an online store on their site. The store does not allowed website's owners to sell their own products directly. Website owners have to 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 the other affiliate links and ranges from 4% to 10% of the product price.

An example of an E-Commerce Failure and its Causes~

Dell Computer Corp.: Failure in B2B E-Commerce Strategy

Dell Computer Corporation is one of the largest firms consisting of approximately 30,000 employees with high top quality supplies and security services in United Stated. In order for a large company like Dell to grow with all the competitors in the industry, the organization must be willing to take chances, to expand the corporation. One of the strategies is business-to-business (B2B) exchange. However the strategy was failed.

Dell’s business-to-business (B2B) exchange failed for a number of reasons. The main reason is lack of knowledge for development and research. Without the existing knowledge in this area shows the higher risks as the company was unprepared for the lack of cooperation with other businesses showed in this new idea. “Some observers think that Dell’s strong name and recognition may have worked against it, causing the company to be viewed as purely a computer manufacturer rather than a site also for alternative business products” (Opinion Wire. 8 February 2001. www.serverworldmagazine.com).

Dell and Ariba Inc. set up a B2B Marketplace hoping to allow online consumer sales to flourish. B2B Marketplace sounded is a great opportunity but Dell jumped it idea too quickly. Computer industry is full of competitive with several B2B exchanges taking place on the Web, just the only stronger will survive. This electronic marketplace is a new way to easily obtain high quality products and have them readily available for sale. Their opportunist attitude towards company strategies left them with an unsuccessful venture. However Dell would not be the top choice for consumer. Dell closed the B2B exchange because of a lack of demand and unwillingness of customers to participate (www.zdnet.co.uk).

The third reason is Dell gave up too early in the game because their expected profits were not met and they just have a short time frame. If the business allowed more time to prove itself, it might have been able to recover some of its profits. “It is predicted that B2B electronic trade will grow to be worth trillions of dollars over the next few years” (Opinion Wire. 8 February 2001, www.serverworldmagazine.com). They should have focused on showing consumers that they are not just a PC firm as advertise the B2B and demonstrate their reliability and value of their computers is a way for company target their faithful customers, aiming to enhance the loyalty in the Dell brand name.

Another reason may have been due to Dell’s choice of suppliers. 3M, Motorola, and Pitney Bowes are second-rate firms compared to companies such as Compaq, Hewlett-Packard and Gateway. These three firms joined forces and formed an Internet-based exchange. This makes these companies had an advantage over Dell because they had a broader range of established business partners and offered a wider variety of IT product. (www.zdnet.co.uk).

Choosing the best-fit match in the business world may have been difficult. If Dell incorporated smaller companies, they would have had more support and the potential for a larger growth. In other words, if they were to select a well-known firm, closely related to the computer industry, it could have provided consumers with a high degree of reassurance. For example, combining with Canon or Epson may have been a better B2B E-commerce strategy. These companies are closely related and can all be used with a Dell computer.

Dell was ‘caught up in the hype’. “Easy money” does not exist and with the competition within the computer industry. Dell should have thoroughly researched the positive and negative effects the corporation could receive. The B2B exchange is an opportunity for the future of the company, yet it needs to reinvest in research and development before it continues with this idea. But, Dell recklessly jumped into this market and faced failure. They were not able to obtain the predicted profits. Since the future of the B2B commerce looking very bright, it would be a good idea for Dell to continue on this project with an optimistic outlook.

The History and Evolution of E-commerce

Electronic Commerce, commonly known as e-commerce, consists of the buying and selling of products and services over electronic systems such as the Internet and other computer networks.

In the late 1970s, Electronic Funds Transfer (EFT) and Electronic Data Interchange (EDI) were introduced.

Electronic funds transfer (EFT) is the computer-based systems that used to perform financial transactions electronically. However, it was limited to financial institutes, large corporations, and some daring businesses.

In 1968, the introduction of the Electronic Data Interchange (EDI) enables the companies to interface and trade without any human contact. However, EDI was not supported by most businesses as it lacks much significance as a medium of commerce and the cost of having it was tremendous.

The earliest example of many-to-many electronic commerce in physical goods was the Boston Computer Exchange, a marketplace for used computers launched in 1982.

In 1984, the ASC X12 standard was adopted, allowing for full communication between any EDI supported companies. The companies could now transfer information on its needs for supplies and receive demands from other companies directly through their computer systems. However, the scope of e-commerce is still unfulfilled.

The first online information marketplace, including online consulting, was likely the American Information Exchange, another pre-Internet online system introduced in 1991.

In 1992, CompuServe offers online retail products to its customers. This is the first time that the people are able to buy things off their computer. In the same year, Mosaic web-browser was available and it was the first “point and click” web-browser.

In 1994, Netscape was introduced to the public as an easy-to-use web browser that allowed common people to surf the net.

In 1995, Microsoft’s Internet Explorer soon followed and increased the number of Internet users to over 14 million. Amazon.com and eBay.com launched in this year.

At this time, people began to define the term ecommerce as the process of purchasing of available goods and services over the internet using secure connections and electronic payment services.

In 1999, the emphasis of e-commerce shifted from B2C to B2B.

By the end of 2000, a lot of European and American business companies offered their services through the World Wide Web. People began to associate a word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

Although the internet became popular worldwide in 1994, it took about five years to introduce security protocols and DSL allowing continual connection to the Internet.

In February of 2000, some major players of e-commerce such as Yahoo, eBay and Amazon were attacked by the hackers. The attacks represent the need to improve the security in the development of e-commerce.

In 2001, the emphasis of e-commerce shifted from B2B to B2E, e-government, e-learning, and m-commerce.

In 2005, social networks started to rise and so did l-commerce and wireless applications.

Now, more and more people go online for the very first time. They’ll send email, chat, and, with any luck for e-busineses, shop. Retailers are counting on the number of people who use the Internet to increase with even more rapidity than in the past due to modern technology. The days of UNIX command-line language, the days of impossibly slow connections asnd the days of consumer apprehension are gone.

References:

http://en.wikipedia.org/wiki/Electronic_commerce

http://iml.jou.ufl.edu/projects/fall01/hanson/

http://www.ecommerce-land.com/history_ecommerce.html

~**An Example of an E-commerce Success and its Causes**~

Amazon.com was founded in 1994 and launched it online in 1995. It is the first online retailer in the Internet world. Amazon has best marketing techniques and expertise due to the customer demands and market trends. Amazon has steadily diversified into retail sales of music CDs, DVDs, consumer software, electronics, beauty products, kitchen items, toys & games, groceries, jewelry, baby products, apparel, sporting goods, watches, health and personal-care items, musical instruments, clothing, industrial & scientific supplies, and other fields.

Amazon provides a lower cost to its customers as they have lower operating costs, thus hold lesser inventory than the traditional stores in the market. Achievement of tremendous success is leaded by effectiveness of management and customer identification. Furthermore, the way to work better and adopting a strong base of selling products distinguish Amazon from the other e-commerce organizations as well as expanded its commercial activities.
In addition, it provides exceptional customer services lead

Amazon.com on top of all the other e-commerce companies. They employ local staffs in foreign countries as they did in Germany and U.K. It is useful in assisting them collect information about the local market trends and customer demands. It also introduced more channels and branches of Amazon.com in these foreign countries to provide them a familiar look to this e-commerce company. For example, in United Kingdom is Amazon.co.uk and for Germany they made Amazon.de. This was a good idea for attracting the locals of foreign countries towards its business in regard to expansion its customers and increase in profits.

Nowadays, globalization has changed the marketing and business trends. Even the concept of electronic commerce at initial stage but it is growing faster and gaining more and more recognition. Amazon.com has earned profit with recognition in e-commerce through its strong organizational and effective team management strategies. But the most significant and distinguishing quality of Amazon.com is its Customer Relation Management. This effective policies and meeting the demands of customers are the key elements that distinct its success from the other e-commerce companies, both who are successful and failed either due to bankruptcy or income loss had to close their companies.

References:
http://www.truthout.org/article/the-success-amazon-welfare-we-should-know-it

http://www.truthout.org/article/the-success-amazon-welfare-we-should-know-it