e.g. iMedia Connection
audiences reached.
opportunity of expanding reach and taking advantage of existing organisations and online
to develop revenue.
deliver the value proposition.
resources. Costs are classically broken down into fixed and variable costs and economies
options are: ad revenue, subscription fees, sales of physical or virtual goods or affiliate‑
based commission arrangements. Licensing and leasing are other alternatives.
An example of how these nine different elements of a business model can be applied is shown
It’s a great framework, but it’s always worth considering what the missing elements of
frameworks are. It’s arguably missing a method of specifying key performance indicators
(KPIs) for evaluating performance of the business model. I recommend adding these to the
relevant sections, in particular for revenue stream, cost structure and key activities. It also
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Chapter 2 Marketplace analysis for e‑commerce
doesn’t directly consider the impact of different forms of competitors. To help here, it’s also
useful to think through how the canvas would look for successful companies already active
in this market. (We will look further at how to define elements of the business model such as
value proposition and targeting in Chapters 5 and 8.)
A review of the different online business models made available through e‑commerce is of
relevance to existing companies, but in particular, start‑up companies and online interme‑
diaries. Venkatram (2000) pointed out that existing businesses needed to use the Internet to
build on current business models, while at the same time experimenting with new business
models. New business models may be important to gain a competitive advantage over exist‑
ing competitors, while at the same time heading off similar business models created by new
entrants. More commonly, they may simply offer a different revenue stream through adver‑
tising or charging for services in a new way. For Internet start‑ ups the viability of a business
model and in particular their sources of revenue will be crucial to their success and funding
from venture capitalists. But what is a business model?
Regardless of the descriptors used, the important point is that as part of strategy develop‑
ment, organisations should identify relevant partners and develop tactics for working with
them appropriately.
Finally, Michael Rappa, a professor at North Carolina State University, has a useful compi‑
lation of examples of online business models in these and other categories in the link shown
at the end of the chapter. At a lower level, Rappa identifies utilities providers that provide
online services (such as the Internet service providers and hosting companies we discuss in
Chapter 3). Now complete Activity 2.2 to assess whether it is possible to simplify these busi‑
ness models and read Case study 2.1 to see examples of new revenue models that can be used
by a forward‑ looking retailer.
Figure 2.11 suggests a different perspective for reviewing alternative business models.
There are three different perspectives from which a business model can be viewed. Any indi‑
vidual organisation can operate in different categories, as the examples below show, but most
will focus on a single category for each perspective. Such a categorisation of business models
can be used as a tool for formulating digital business strategy. The three perspectives, with
examples, are:
1
Marketplace position perspective. The book publisher here is the manufacturer, Amazon
is a retailer and Yahoo! is both a retailer and a marketplace intermediary.
2
Revenue model perspective. The book publisher can use the web to sell direct while Yahoo!
and Amazon can take commission‑ based sales. Yahoo! also has advertising as a revenue
model.
3
Commercial arrangement perspective. All three companies offer fixed‑ price sales, but, in
its place as a marketplace intermediary, Yahoo! also offers alternatives.
Activity 2.2
Exploring business models
Purpose
To explore the different types of business model available on the web and suggest a
structure for evaluating business models.
Question
Identify overlap between the different business models identified by Timmers (1999).
Can you group the different business models into different types of services? Do you
think these business models operate in isolation?
Answers to activities can be found at www.pearsoned.co.uk/chaffey
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