Community Business Model

  • The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking. Open Source — software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [Red Hat]
  • Open Content — openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [Wikipedia]
  • Public Broadcasting — user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. [The Classical Station (WCPE.org)]
  • Social Networking Services — sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [Flickr, Friendster, Orkut]. There are turnkey web software that create social networking sites similar to these

Subscription Business Model

  • Users are charged a periodic — daily, monthly or annual — fee to subscribe to a service. It is not uncommon for sites to combine free content with “premium” (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined. Content Services — provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [gameFly.com, Netflix]
  • Person-to-Person Networking Services — are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [Classmates]
  • Trust Services — come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [Truste]
  • Internet Services Providers — offer network connectivity and related services on a monthly subscription. [America Online, BlueHost]
  • Application Service Providers – Offers web services to its customers on a monthly subscriptions. This could be web services like Volusion.com , or online data backup service like Mozy, carbonite and Backup To Net.com. New incarnation of ASPs is Software as a Service (SaaS) similar to SalesForce.com

Advertising Business Model

n  The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized. Portal — usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic.

n  [Yahoo!]Classifieds — list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee.

n  [Monster.com, Craigslist, Match.com]User Registration — content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns.

n  [NYTimes]Query-based Paid Placement — sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture’s trademark “pay-for-performance” model.

n  [Google, Overture]Contextual Advertising / Behavioral Marketing — freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user’s surfing activity.

n  Content-Targeted Advertising — pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page.

n  [Google]Intromercials — animated full-screen ads placed at the entry of a site before a user reaches the intended content.

n  [CBS MarketWatch]Ultramercials — interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [Salon in cooperation with Mercedes-Benz]

Brokerage Business Models

  • Brokers are market-makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary. Brokerage models include:
  • Marketplace Exchange — offers a full range of services covering the transaction process, from market assessment to negotiation and fulfillment. Exchanges operate independently or are backed by an industry consortium. [Orbitz, ChemConnect]. Markets Places are created using software like eSwap from iScripts
  • Buy/Sell Fulfillment — takes customer orders to buy or sell a product or service, including terms like price and delivery. [CarsDirect, Respond.com]
  • Demand Collection System — the patented “name-your-price” model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. [Priceline.com]
  • Auction Broker — conducts auctions for sellers (individuals or merchants). Broker charges the seller a listing fee and commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. [eBay]
  • Transaction Broker — provides a third-party payment mechanism for buyers and sellers to settle a transaction. [PayPal, Escrow.com]
  • Distributor — is a catalog operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners.
  • Search Agent — a software agent or “robot” used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.
  • Virtual Marketplace — or virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship marketing services. [zShops, Etsy.com and Merchant Services at Amazon.com] . These types of virtual marketplaces can be created using MultiCart or even GoStores