Thursday, June 18, 2009

Revenue Model for Google, and eBay

Revenue model is a description of how an organization will earn revenue. There are different techniques used in E-commerce in earning revenue. Some of the examples of revenue models are as follow:
1. Sales are revenue generated from selling of good and services over publishers’ websites
2. Transaction fees are commissions earned based on the volume of transactions made. It can be either of a fixed value or levied per transaction.
3. Subscription fees are monthly or yearly amount paid by customers to get some types of service.
4. Advertising fees are amount charged by publishers from advertisers who place a banner on their websites.
5. Affiliate fees commissions publishers received for referring customers to others’ websites. Examples of affiliate fees may included:
a) Cost per thousand impressions (CPM) is frequently used in advertising to represent cost per thousand. Each CPM will only be charged when an advertisement is pop-up on users’ screens for 100 times.
b) Cost per click (CPC) is amount of money paid by an advertiser to publishers. Cost will be charged for a single click on its advertisement that brings one visitor to its website.
c) Cost per action (CPA) is an online advertising pricing model where advertisers pay for each action done by visitors linked to the advertisement. Examples of action such as requesting or buying a product.
6. Other revenue sources. For example, some websites allow people to play games or watch sports in real time for a fee. E.g.:

Now, let’s look at the revenue model of various websites.

Google does not sell goods or services as it is only a content provider. Therefore, most of its revenue is from advertising. There are two sub-parts of Google which are Google Adwords and Google AdSense.
Google Adwords ( earns its revenue mainly from advertising of products. It is using cost per click model whereby advertisers will only need to pay if people click on their advertisement. When a person searches for information, advertisements with the relevant keywords will appear either at the right side of screen or above the search results.

On the other hand, Google AdSense ( is an advertisement application operated by Google. Website owners can sign up for this program to enable their texts, images or advertisements to be appeared on their websites. Google often earn revenue either by using cost per click or cost per thousand impressions.

Amazon is one of the biggest companies which sell goods over Internet. It started its business by selling books and now expanded to sale of CDs, software, video games, video games and so on. As Amazon is selling various types of products, it may earn revenue from sales of products. Furthermore, Amazon partners’ websites can display its books directly on their websites and send interested customers to its website when visitors are ready to buy it. After that, Amazon will pay a commission for the sale to the site owner.

eBay is a worldwide auction website since 3 September 1995. It is now managed by an American Internet, eBay Inc.. eBay is an online auction and shopping website where people and businesses can buy and sell various goods and services globally. Majority of its sales are taken place by auctioning. Customer who bid for a product at highest price will be able to get the product. Now, eBay is also using a substantial segment of listings in the “Buy It Now”. This gives visitors chances to purchase an item immediately before bidding begins. Through these, eBay can earn transaction fees by charging commission from sellers who sold their product successfully.