Business
models are perhaps the most discussed and least understood aspect of
the web. There is so much talk about how the web changes traditional
business models. But there is little clear-cut evidence of exactly what
this means.
In the most basic
sense, a business model is the method of doing business by which a
company can sustain itself -- that is, generate revenue. The business
model spells-out how a company makes money by specifying where it is
positioned in the value chain.
Some models are
quite simple. A company produces a good or service and sells it to
customers. If all goes well, the revenues from sales exceed the cost of
operation and the company realizes a profit. Other models can be more
intricately woven. Broadcasting is a good example. Radio and later
television programming has been broadcasted over the airwaves free to
anyone with a receiver for much of the past century. The broadcaster is
part of a complex network of distributors, content creators, advertisers
(and their agencies), and listeners or viewers. Who makes money and how
much is not always clear at the outset. The bottom line depends on many
competing factors.
Internet commerce will give rise to new kinds of business models. That much is certain. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.
Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.
The basic categories of business models discussed in the table below include:
Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But what is new and novel as a business model is not always clear. Some of the more noteworthy patents may be challenged in the courts.
Internet commerce will give rise to new kinds of business models. That much is certain. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.
Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.
The basic categories of business models discussed in the table below include:
- Brokerage
- Advertising
- Infomediary
- Merchant
- Manufacturer (Direct)
- Affiliate
- Community
- Subscription
- Utility
Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But what is new and novel as a business model is not always clear. Some of the more noteworthy patents may be challenged in the courts.
