Running a successful e-business requires having the right business model. Various e-business models exist to guide you on the type of product / service to sell, how to reach customers and how to operate the business.
What are E-Business Models?
A business model is a plan that is a summary of how a business sells its products or services, who it sells to and how it operates. E-business models describe these activities centered around Internet technology. E-businesses often run entirely online, or partly online and offline. The benefit of a business model is to provide a business with an overall mission and organization structure in which to operate. Business owners should determine the appropriate business model, out of the various e-business models, based on their product and service, market and methods of reaching their customers.
Before starting an e-business, it is advantageous to conduct research and fully understand the appropriate business model. Ideally this research and evaluation is done before actually writing a business plan. This initial preparation is essential in getting a clear idea and footing of how the business can operate successfully.
Existing E-business Models
Community Based - meaning that the driving force behind how the business operates is the community itself. That is, the community of users produces the intellectual content, and this is then sold to the market at large. In this business model, some communities also handle the administration and management of the business. Content providers such as Bright Hub use the community-based model. Etsy.com for example is a company in which users produce the content in their own online stores, but pay a transaction fee to Etsy.com for each sale.
Infomedia-Based - which means that the business sells an information-based product, typically an e-book or topic-based videos. The business product is learning based, and copies of that product are sold to a targeted audience. E-book publishing companies are a good example of infomedia model businesses. Many e-book companies also allow users to self-publish within a community setting, in addition to sharing in the sales of the e-book on the site. These companies are an example of a hybrid approach - infomedia and community-based model.
Subscription-based - meaning that the business sells products and services by a term, such as a number of months or annually. Product-based subscription-based models ,offer customers the opportunity to by a contract to rent the product for their own use. Service based ones give the customer contracts that will cover a certain predetermined term. Internet service providers and web hosts such as GoDaddy.com are examples of e-businesses that use a service-based subscription model. Netflix.com is an example of a product-based company that rents DVDs based on various subscription plans, which vary by the number of the DVDs that can be rented per month.
Affiliate-based - these businesses make money by referring customers to other products and services. Similar to commission sales, affiliate-based businesses partner with many other businesses that also share the same customer base. Through this model, affiliate-based businesses benefit when customers purchase their products and services but also when customers purchase from their affiliates. Web-based blogs that use Google Ads to advertise affiliate partner products are good examples to consider for this model.
Advertising-based Model - this model encompasses businesses that make money from displaying product and service ads of other companies. Ezines and web blogs that sponsor advertising from various companies are good examples of this model.
Points to Ponder
An e-business model summarizes how a business will sell its products and services, what customers they will sell to and how it will operate. Business owners should determine an appropriate business model before creating and researching a business plan. Out of the various e-business models, some well-known and researched ones are - community, infomedia, subscription, affiliate and advertising-based. There have been many e-business companies that have utilized these models within the past several decades. E-businesses can be all online or part online, but all can be identified as one or a hybrid of these models.