Online Internet Business ModelsArchives > Online Internet Business Models
By Anajana C. S.
This article explores some successful Internet companies and how they tapped the internet business opportunity. Since our company often does web development work for e-businesses and web entrepreneurs, we have gained experience in understanding both the technological and business side of a web site. Please contact us here to outsource web business consulting and development.
At a time when 'dot-cons' and 'dot-com doom' are the most commonly used phrases, discussing dot-com successes would be tantamount to burying one's head in the sand and talking. Or is it? Is the Internet revolution really over? According to analysts and the economy soothsayers, No! The Internet has entrenched itself into the economy today. This medium that provides enormous opportunities to any business by removing the twin obstacles of time and distance is here to stay, and thrive.
What lessons can be learnt from those who survived the carnage on the Infobahn? How can you rate a successful e-business?The outward signs of a robust and thriving business are:
Revenue increases
Ability to generate profits
Success in creating meaningful alliances
Success in expanding into new markets
Differentiating itself from other business models
What are the key areas that a profitable web site needs to concentrate on?
Develop a unique e-business website
Control the product line
Introduce new products on a regular basis
Ensure easy and reliable credit-card payment methods
Provide customer-friendly policies
On-time delivery
Keep promises
Develop a clever marketing strategy
Be the best in your field
Being ranked among the top 5 in a search engine is only a part of the e-commerce puzzle, your web site needs to satisfy customers once they get there. With new and nimble competitors springing up by the dozen, it is easy for a customer to opt for a competitor who may be easier to do e-business with. One sure way to avoid this is to adopt new technology. The goal should be to automate all processes as much as possible while maintaining personalized human interaction at the same time. Implementation of technology following conventional time-tested principles like dedication and expertise in an adaptive, dynamic environment is what is required.
Existing business models are of many kinds:
Advertising - banner and direct marketing
Subscription sites
Customer services
Directory services
Content providers
Product sales
Most successful companies pursue several related but different models concurrently. They defy easy categorization by diversifying revenue streams and becoming hybrids in a cost-efficient way.
Let's take a look at some of the top e-businesses in the field today:
E-Bay
HomeStore.com
Oracle
CISCO
Amazon.com
DoubleClick.com
YAHOO!
EBAYA company that has emerged unscathed from the recent dot-com bust with profits soaring to almost 400% and revenues doubling in the past one year. It has transformed auctions that were limited to garage sales and flea markets into highly evolved e-marketplaces. Selling just about anything, from antiques and jewelry to computers, automobiles and even auto insurance, it has 29.7 million registered users today.
Adopting an amazing and unique culture, where buyers and sellers of all items are allowed to post their comments online, where credit-card payment facilities are secure and easy, the company projects a trustworthy and reliable image.
Apart from bidding, certain high quality goods can be sold at prices fixed by the seller. This site also offers professional services for all kinds of business needs. A widespread global reach makes its easy for a buyer in Hong Kong to bid and buy a product from a seller in Paris while the regional sites in North America are able to offer hard-to-ship merchandise.
Person-to-person trading and a barter economy have established the company on a secure B2B and B2C platform. Other companies like Yahoo! and Excite have been quick to catch on and incorporate auctions into their sites. Priceline.com, a site that offers airline tickets on discount has begun experimenting quite successfully with this business model.
To summarize, their business model can be elucidated thus:
Automation of traditional methods of selling unique items
Reliability in mode of payments
Customer friendly company
Professional services in addition to just plain selling of goods
Global reach
Regional diversification
Successful advertising
HOMESTORE.COMStatistics have revealed that realty sites account for about 9.6% of all online visitors. Homestore.com is a company that has dominated the real estate field with 3.28 million customers in January 2001 and is listed among the Fortune top e-50. It registered a growth of 252% at one stage.
Homestore.com's internet business model allows prospective buyers to review properties before buying. Is that all? No, they also offer financial advice, online loans, and buyer's guides to homes and household items, home improvement tips, remodeling, and safety and security aspects. Useful advice when moving home and tips on resettling has ensured user satisfaction to the core.
Their main revenue came in from subscriptions (52%) and the remaining from advertising. As a subscription site they picked a specific topic which a segment of the population would be passionate about and marketed their services through strategic advertising. Subscription sites that allow users access to a regularly updated online database of any kind for a fee are fast evolving into healthy and strong e-businesses. Why have they become so popular? Yes, free stuff is available anywhere on the Internet, but most of it tends to be disorganized and chaotic. This makes customized information worth paying for.
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Useful tips for a wannabe subscription site:Pick a specific target that niche users may be passionate about
Market the site through banner ads and direct marketing (newsletters and e-mail) that offer a few tantalizing freebies regularly
Offer the complete content to members only
Links worth looking at are:Thestreet.com - A financial journalism site that offers timely news and analysis, market trends, ratings, expert consultancy services, conferences and newsletters.
Christiansciencemonitor.com: The electronic edition of this famous 90-year old newspaper.
Preachingtoday.com: Services like illustration of biblical quotes and facts that preachers can incorporate in their sermons.
Sellyourbrainfood.com: Offers services related to digital publishing and promotions.
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ORACLEThis software and service provider entered the digitized world only in 1998, and metamorphosed into a digital pioneer in the span of two years. Innovative products and services and integration of these services have brought them into the forefront of web innovation today.
Internet business models like the Biz Online Initiative that deliver simple and complete online services and a host of other tools that customers require in setting up an e-business model, have made them a one stop shop for e-businesses today. Their built-in self-service system for customers, employees and suppliers improved productivity and accuracy and brought down costs by 100's of millions of dollars. Consulting services with major firms like Sun Professional Systems have established their reliability with customers.
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Their business formula:
Innovative products and packages
Integration of internal processes
Exemplary customer service - a user friendly web site that connects customers easily
Fast online e-business services
Expert consultancy service
Another company using a similar business model is Exodus Communications, an Internet data center that offers a range of web hosting services, bandwidth on demand, security monitoring. Their servers host leading web sites like Yahoo!, e-Bay and Merril Lynch. They allow these firms to deliver content and applications online round the clock without fail.
35% of their revenue comes from a very successful e-business consulting firm whom they have partnered with (Sapient). They are expanding from 19 data centers to 34 data centers this year.
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CISCOCisco develops switches and routers for Local Area Networks (LAN) and Wireless Area Networks (WAN) and the related software. They have become the worldwide leaders in networking for the Internet today.
90% of their sales are conducted over the Internet. They offer expertise in planning and executing Internet enabled solutions.The company has grown in the past 7 years with 71 acquisitions to its credit, the latest being its investments in an optical equipment company and speech recognition software makers. Their business model could be termed an acquisition one!
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AMAZON.COMThe customer is King here! Amazon pampers their customers, tracks their tastes and uses this information to create a unique customer experience. This e-tailer cultivates relationships that lead to customers liking and trusting them. This kind of service surpasses the most brilliant technology in use today. Amazon brought in the world of successful one-to-one marketing, a personal touch from another era.
Recently though, they have suffered heavy losses, proving that any successful e-business strategy will survive provided it is based on a solid brick and mortar foundation, a la Barnes and Noble, another famous online bookseller. Although barnesandnoble.com and Barnes the Noble Ltd. are run separately, a customer tends to associate trust and comfort in a known and established brand.
To summarize, exemplary customer service, successful online advertising and special discounted offers made Amazon and books synonymous terms today.
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DOUBLECLICK.COMThis Fortune e-50 company offers a collection of premium sites for custom ad-buys and sponsorships in various fields - Business, automobiles, entertainment, technology, travel and health. They help markets build brands, increase sales, maximize revenue and build one-to-one relationships with their customers. They offer agencies plans to manage online campaigns.
Their direct marketing strategies use customer data to refine marketing messages and increase investment returns. One of their divisions, Abacus is one of the largest databases of buyer behavior in about 90 million households in the United States itself. Another division, www.diameter.net conducts online research to evaluate and understand online campaigns and strategies. Some of their clients include www.macromedia.com, www.nasdaq.com, www.networldsolutions.com and www.palm.net.
The web has proven to be an amazing vehicle for advertising and reaching millions without spending a dime on postage and printing. Stu Heinecke Services, an advertising solutions company used personalized cartoon direct mail and achieved response rates as high as 100%.
Online ads possess tremendous communication powers. Banner ads placed on sites like CNN, Lycos, CompuServe, Pathfinder and The New York Times showed that:
appropriate placement of the ad on specific targeted sites,
using a search component or a woman's face in a banner ad,
using odd-shaped attention grabbing banners,
including trading links with other sites, and
hosting online chat are a sure fire way to get a response. Online advertising is international advertising that gets a 24X7 exposure for much lesser costs.
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YAHOO!The "operating system" of the net and a site for evolving search engines, free news and information services, online ads, banner ads, sports and news, video and audio, clubs and auction stores has become the most popular directory in the web. The value of this successful business model lies in its unique and easy categorization of all pages and subjects - a completely professional looking web site in all.
But, a BPI (Buying Power Index) report reveals that more online buying and popularity of a site don't go hand in hand. Other search engines like Altavista, Excite and Juno seem to have raked in more profits recently.
Online advertising was the main revenue for Yahoo!, but they didn't really check on what kind of ads worked online. Immediate success stopped them from evolving and developing other important aspects of e-business. As a result, this year they have been forced to cut budgets and ads, showing that generalized media doesn't work compared to specialized media. Also, all of Yahoo's content is owned by other sites and only licensed for their use.
Among the other successful dot-coms, trends revealed that online e-brokers offer the best economic models among consumer-centered Internet companies. Instead of spending on physical infrastructure they concentrated in increasing the volume of transactions.
1-800Flowers.com blended telephone and Internet technologies, Reflect.com, a beauty customization site outlasted other higher profile e-tailers in the business, thus proving that the basic B2C business model is valid.
So, what we have seen is that a combination of strategies, smart thinking, brilliant business plans, great and innovative promotional ideas are an integral part of any e-success. There is no doubt that in the near future, an average person anywhere in the world will surf the Internet more often than he or she watches television or uses the telephone. As a result, it makes sense for entrepreneurs of all kinds to come up with ideas of generating income by marketing their products or services to these surfers. Competition in cyberspace may become even fiercer in the future and therefore the right business plan is what will eventually ensure long-term success.
