Transaction Net: Business Models

Everyone's talking about online commerce, but who's actually doing it--and how? Where do the revenues come from, where do the expenses go, and where do payment and delivery take place? Before you invest in a site for your business, you'll need to decide which niche a business like yours will thrive in. This table, which summarizes the ins and outs of five models of online business, may help you choose a model, or for more detailed information, visit our directory on this subject, our open source page, and our reviews of online payment methods.

Comparison of Online Business Models
MODELS Merchandising
Online
Information
Online
Online Access Online
Advertising
More Efficient
- Customer Support and
-Internal Documentation
Examples amazon books

salami.com

Preview Travel

Dell Computers

www.onsale.com

eBay

LA Times archives

Wall Street Journal

beyond.com

Earthlink

MCI

Pacific Bell

Yahoo! and other search engines/portals

Netscape

hotmail and other free email services

Federal Express online package tracking

U.S. Postal Service

Intranets

Scale and Lifespan very specialized niche markets
proven for larger-revenue companies who move online
(insufficient evidence)
service as commodity, so large scale
requires significant site traffic
most businesses can enhance operations w/ the web
MODELS Merchandising
Online
Information
Online
Online Access Online
Advertising
More, Better, Faster
Revenue Customers pay you (online or off) for merchandise ordered online
Expanding markets past traditional geographic limits
Customers pay
- per document,
- per use, or
- per subscription;

or


Sponsors pay to set up (and possibly maintain) the project
Customers pay for
- metered usage or
- subscriptions


Play on economies of scale
Businesses or brokers pay
- per 'impression' or
- per order
Cost-cutting: take advantage of speed and interactivity


more personalized customer service at all hours
better documentation, communication, and training within the organization
build relationship with customers w/o any of you wasting time in a store
- Costs need to invest in secure technology or pay to verify purchases over telephone
shipping or delivery costs may increase if your geographic base broadens
costs of listings in Net Yellow Pages and search engines or other ads
need to invest in
- the security of your system,
- monitoring/verifying purchases,
- worthwhile content,
- advertising your site

- security
- maintenance
- customer service
ads may distract visitors from your business objectives
--or even drive customers away because of belief in Free Information on the Net
may have to shell out bucks for access, software, hardware, expertise
= Profit rare
rare
currently successful
depends on volume of visits
depends on current niche
MODELS Merchandising
Online
Information
Online
Online Access Online
Advertising
More, Better, Faster
Favored small very targeted businesses
businesses that provide great value, and
other businesses that will benefit from providing information
businesses catering to young tech-literate middle-class (and up) males< hr size=1 width=20> businesses related to distant geographical locations
businesses where speed of delivery counts
businesses with very rare and desirable content
businesses whose content will help other businesses
anyone who can buy low and sell high
high-traffic sites or sites serving a particular identifiable demographic
business owners who best understand the web medium
business owners who can best serve the people who prefer the web medium
Site:

Content?
Visitors?
Service?
Interaction?
Updates?

powerful, but not so s l o w as to lose customers
will include forms
possibly on a secure server,
visited by prequalified customers from a related site
fairly high-tech: need to ensure security and possibly enable a single authorized download
visitors with free version may buy Real Version?
well-maintained, 24 hours/day, 7 days/week!
Your content, plus
distracting ads
that take a long time to load and may draw people away from your site
Ideally, a fast customized version of the information you already need to provide, plus whatever else your clients want to come back to.
MODELS Merchandising
Online
Information
Online
Online Access Online
Advertising
More, Better, Faster

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