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eCommerce Business Models

by Ron Kurtus (revised 1 July 2008)

Since eCommerce consists of doing business online or electronically, the business or revenue models are somewhat different than that of a "brick and mortar" business. Common eCommerce models are direct online sales, selling online advertising space, and online commissions.

Questions you may have include:

• What is the direct online sales model?
• What is the online advertising space model?
• What is the online commission model?

This lesson will answer those questions. There is a mini-quiz near the end of the lesson.

Direct online sales model

You can establish your website as your place of business and directly sell to those entering your "store" to make a purchase. Since delivery is often by mail, this is similar to customers buying from a mail order catalog. Software products, e-books, music and video files can be delivered to the customer through the downloading process.

Amazon.com is a good example of a business using the direct sales model to gain revenue.

Online advertising space model

Just as television and radio stations gain revenue from advertisements, related to the reach or number of viewers they have, so too can popular websites charge for the number of viewers seeing an ad. A better method is to count the number of viewers that click on an ad, taking them to the company's website.

Many sites use Google Adsense ads to generate revenue.

Online commission model

Individuals and companies can also be established as affiliates, where they gain a commission for sales made through a company using the direct online sales model.

Online companies such as eBay and PayPal charge a commission for their services. Google gains a commission for ads placed on others' websites.

Summary

eCommerce consists of doing business online or electronically. The online business or revenue models are somewhat different than that of a "brick and mortar" business. Common models are direct online sales, selling online advertising space, and online commissions.

Answers to Readers' Questions

Know how to make money

Resources

The following are resources on this subject.

Websites

eCommerce Resources

Books

Top-rated books on eCommerce

Miscellaneous

Mini-quiz to check your understanding

1. What is an advantage of online music sales?

2. Why do companies prefer to pay more for click-through ads than those just viewed?

3. For what service does eBay charge a commission?

If you got all three correct, you are on your way to becoming a Champion in eCommerce. If you had problems, you had better look over the material again.

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