eCommerce Revenue Models

by Ron Kurtus (8 April 2011)

An e-commerce revenue model is the method you use to gain profits from your online business. It is a subset of your business model, which is your plan to gain customers and run a successful business.

Common ways to make money through e-commerce include direct online sales, gaining commissions from sales referrals, selling online advertising space and selling subscriptions.

Newspapers and magazines have tried online subscriptions, but the model has not proved very successful.

Questions you may have include:

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

This lesson will answer those questions.

Direct online sales

Direct sales consists of a customer coming to your "store" to make a purchase of a product or even service that you have to offer. You can either handle the complete sale from your site or work through a distributor.

Complete sale

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.

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

Software products, e-books, music and video files can be delivered to the customer through the downloading process, while standard products or hardware is shipped through the mail or via services such as UPS or FedEx.

Working through distributor

You can sell products from your website by using distributors, who will make or get the product and then ship it for you.

For example, CafePress will print out t-shirts of you design and handle the payment and shipping for you.

This method is effective for individuals or those starting a small business through their website.

Referrals for a commission

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.

You can become an affiliate to Amazon.com, such that anything purchases by a customers referred to their site from yours will earn you a 6% commission.

Being an affiliate means you are essentially referring a customer to a company's website. You get a commission for what the person buys.

Providing online advertising space

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.

You can also sell or rent ad space on your website, dealing directly with advertisers.

Summary

The e-commerce revenue model is the method you use to gain profits from your online business. The most common ways to make money through e-commerce are direct online sales, gaining commissions from sales referrals and selling online advertising space.

Know how to make money