How The Big Timers Play The Game

Have any of you wondered how internet big timers make money?

It's quite simple actually: they generate income through the many revenue models. Now you are wondering – what the heck is a revenue model?

Strictly speaking, a revenue model is a mold of how companies earn revenue, produce profit, and generate return on their invested capital. There are many revenue models but the most common are:

Sales of Goods or Services Model	The company gains a margin from the sales of goods, services or information
Transaction Fee Model	The company collects a fee for each transaction that is conducted through its e-Business infrastructure
Subscription Fee Model	The company charges a regular fee for the access of information or services provided
Advertising Fee Model	The company provides a platform for others to advertise in its website and collects a fee for it.
Affiliate Fee Model	The company receives payment for referring customers to other web sites
License Fees Model	The company collects a fee for e-Business processes to which the company has rights

Other Revenue Models are Referral Fee Model, Ransom Model and Sponsorships Model.

So with the knowledge of what revenue models are, you can determine how e-commerce giants roll in the cash. I will only be illustrating three companies namely - Google, Amazon.com and eBay
and the few most prominent revenue model that the giants uses.

Google’s Revenue Model

Google generates revenue mainly from advertising. The bulk of the revenue is generated through Google AdWords. Google AdWords allows clients to advertise through Google’s website.the advertisement is usually in text form or a banner ad. Google collects a nominal activation fee (USD 5) and the clients also pay Google based on per-click or per-thousand- impressions. Pay per-click is an internet advertising model which the client only pays when the advertisement is clicked. Pay per-thousand-impression means the client needs to pay for every 1000 times a user views his/her ad and an impression is recorded.

Amazon.com Revenue Model

We deem Amazon.com as one of the most successful companies in e-commerce. It generates income through various revenue models. Amazon.com started out by being an electronic retailer. It sells goods (books, music, video games, electronic gadgets, apparels, etc.) to business and also to customers online. Thus, it applies the Sales of Goods or Services Model.

Besides that, Amazon.com enables customers to sell their goods through its WebStore. Amazon’s WebStore enables customers to create an e-commerce website which is powered by the same

technology and system as Amazon. Amazon charges $59.99 per month for each WebStore (you can have multiple WebStores) plus 7% commission on each transaction made through the WebStore.

(Proceed to http://webstore.amazon.com/?ld=AZNav if interested)

Above that Amazon.com is one of the "originators" of affiliate programs. Amazon receives a referral fee from the affiliates when a customer clicks on their link and purchases goods at the transaction site. Amazon Associates provides publishers the opportunity to display affiliate links and details for Amazon.com products in a variety of formats, including product images, text links, and banners.

eBay's Revenue Model

When I mention eBay, I am focusing on eBay alone not together with its subsidiaries (Half.com. Paypal ,Kikiji.com).

eBay is a platform for customers to buy and sell their goods online (consumer to consumer). In other words eBay is the middle man. eBay focuses on the transaction fee model where it collects commission from its customers when a transaction is done through its website. When you catalog an item on eBay, you're charged an Insertion Fee. You are also charged a Final Value Fee when the item is sold. There are two fee structures based on how the goods are sold. First is the auction-style listing and second is selling the item at a fixed price.

For reference of the fee structure please go to http://pages.ebay.com/help/sell/fees.html%23auction

eBay’s rapid user growth created community, content and search value streams, which in turn created the critical mass for substantial advertising revenue.

So you can now see the difference in the revenue modals used by the three giants. Google’s main revenue generating model is advertising fee while Amazon.com though have many revenue models mainly focuses on the sales of good or services model and finally eBay’s model of focus is the transaction fee model.