Revenue Model for Google,eBay and Amazon.com

REVENUE MODEL

Google, eBay and Amazon.com

The main source of GOOGLE’s REVENUE is focused on advertisement. According to the data from Google's latest 10-Q filing, the profit of Google’s advertisement is 98% of its total revenue. Google advertisement include Google Adwords, Goole Adsense and Froogle. On the other hands, eBay is an online auction and shopping website that generates revenue from insertion fees, promotional fees, final value fees and sales revenue model through its subsidiary. Amazon.com is success in online-shopping as it generates revenue mainly by selling books, electronic, videos and so on.

Google Adwords, which generate most revenue to Google, is pay per click advertising program that are design to allow the advertiser to present advertisement to people that are looking for information of what the advertiser has offer. Currently, Google is testing a new advertising program that pays site owner when a visitors clicks on an advertisement and perform a specific auction. This is known as Cost-Per-Click model.

Read information from Google Advertising Program and Google’s revenue model

For , it mainly focus on online auction which generates huge profit. The convenience of online auction has increased the number of bidders as the seller and bidders can participate in the auction at anywhere and anytime. Besides that, due to the potential of lower price, the broad scope of products and service available as well as the simple way to access and operate the auction process, it is not difficult to find out that there are large number of bidders and sellers.

Read article – Reasons to still love eBay

Moreover,allow sellers to offer their goods. Buyers are permitted to review the products, comment and rate it on the rating scale from one to five stars. Besides that, Amazon is pioneer affiliate partnership marketing. It allow website owner to create the online store in their website and display Amazon books. Then Amazon pays the referral fees from the sales to website owner.

Failure of Kozmo

E-commerce has brought a lot of benefits. This can be seen that many companies have started their business from physical system to online system. In fact, not every company is successfully moving their business plan to online system. Therefore, Companies need to plan and consider the factors that will affect their plan to moving their business to e-commerce system.



Here is the example of the FAILURE of e-commerce:

kozmo.com was a online company which organized in 1997 by Joseph Park and Yong Kang in New York City . kozmo.com is convenient as it provided many items and products from snack food to DVD. One of its competitive advantage and also where Kozmo.com well known of its delivery system. Kozmo.com will deliver small item by free of charge.Moreover, Kozmo.com promises that they will deliver the product which the consumer orders within an hour. It has attracted many college students which came from middle class base.

Kozmo.com realized that target on the college students does not bring much profit after 4 years. Therefore, it decided to change their targeted group who make up of 76% of his business to people who would likely to order expensive products. Kozmo started to duplicate their categories to 5 main products which are meals, entertainment, drug shop, gift shop and grocery in order to attract customers who are less Internet-savvy. Other than that, Kozmo.com joint with other restaurants to delivered their food as to launch their new plan of ‘ready to eat gourmet meals’.

In April 2001, Kozmo.com FAILED after the collapse of the dot-com bubble. It shutting down the business and laid off its 1100 employees. According to the document of Securities and Exchange Commission, Kozmo.com had made a profit of $3.5 in 1999 but with a net loss of $26.3 million at the end.

The REASONS that Kozmo failed:

BEFORE change their plan:

Costly
Kozmo deliver a small item on free basis. Although it can attract consumer, it is costly as the transportation fee may not be covered. Kozmo has realized this and finally initiated a $10 minimum charge but it also cannot stop it from shutting down its company

Home Delivery System
Although Kozmo delivery system is attractive, but it has been proven that home delivery system is hard to make profit. Example: Webvanalaaa.

AFTER change their plan:

Change Plan
This is the 1 main reason of failure of the Kozmo.com which it changing their target from college student who make up of 76% of his business to upscale consumer.


Restaurant-delivery Service
Kozmo will have to compete over many restaurants that provided delivery service which offered more choice (food) in New York City.

Besides using a success example, a failure example also indicate a good lesson for us to learn. From this Kozmo.dom, we can learn that planning is an important starting point to conduct the business in e-commerce. We must look and think at the several aspect or results instead on just rely on one competitive advantage. Delivery system can be a competitive advantage but it also can make your business going to a downturn in this case.

Success of eBay and its Causes

eBay is one of the success example for e-commerce and also a well-known website for everyone. It has around 13 years of history. eBay has a strong primary goal and mission is to be an online person-to-person community.



eBay's success is based on its ability to transform many fragmented, primarily local markets into global ones at a relatively low cost to its users. Nowadays, all buying and selling transaction can be make online so that it can satisfied people who always have a high demand and make sure that they are getting the items that they need. If compare to last time, it have been done through garage sales, classified advertising in local newspapers, and flea markets. However, the number of people available to complete a transaction was limited because a face-to-face meeting was typically required.


FRAUD have been mitigated through a user feedback system escrow services, so that users right are PROTECTED. These also can increase the trust of users on eBay. eBay's ability to bring a large number of buyers and sellers together is what has driven its GROWTH. The more buyers there are, the more sellers want to participate. Conversely, the more sellers there are, the more items are to buy, and the greater the attraction of the service to buyers.

eBay makes money by charging listing fees and collecting a percentage of the selling price of items sold through the site. EBay also owns PayPal, which makes money through investing its clients' assets and from transaction fees.

PayPal

eBay successfully introduced NEW MARKET, such as car sales, which many thought would not be adaptable to its business model. Although just a small portions of the world's population currently using eBay but fundamentally, it is so successful because it meets its customer's needs better than any competing service. No one else has accumulated such a large number of buyers and sellers in a single marketplace.

The History and Evolution of E-Commerce

Electronic Commerce (generally known as e-commerce) is the process of buying, selling, transferring, or exchanging products, services, and/or information through computer networks, including the Internet (Turban, 2008). E-commerce as a methods of organization, merchants, and consumer to cut cost and help to improve quality of goods and services. The amount of transaction has grown dramatically since the wide spread of Internet. E-commerce generally considered as sales aspects of e-business.

History and Evolution of E-commerce

Initially e-commerce meant the facilitation of commercial transactions electronically, using technologies such as Electronic Data Interchange (EDI) and Electronic Fund Transfe (EFT). Both of these technologies gave an opportunity for users to exchange information, conduct electronic transaction. In late 1970s, these technologies become more capable and businesses and organizations are able to send commercial documentation electronically, such as purchase order. In addition, credit cards, automated teller machine (ATM), and telephone banking are accepted as form of e-commerce in 1980s. Starting 1990s, Enterprise Resourse Planning (ERP), data mining, and warehousing are included as part of e-commerce.

In 1994, the use of Internet became popular in public, yet it still took about four years to develop the security protocols (such as HTTP) and Digital Subscriber Line (DSL). DSL allows rapid access and continual connection to the Internet. In the year of 2000, many companies and organizations in United States and Western have proposed their services through World Wide Web. The meaning of e-commerce changed and people began to define it as the process of purchasing goods and services through Internet using secure connections and electronic payment.

Timeline

Year	Event
1990	The first web browser-World Wide Web was developed by Tim Berners-Lee using a NeXT computer.
1992	26 accessible sites available in World Wide Web.
1993	First browser to support the display of images was released.
1994	World’s first search engine was launched. World’s first secure ecommerce transaction was reported to have occurred.
1995	First online affiliate program being launched. Dell and Cisco began use Internet for commercial transaction. Well-known E-commerce leaders, eBay.com and Am azon.com were introduced.
1998	PayPal was founded. My Simon, as the first comparison shopping site was launched. Goto.com introduced Pay Per Click Advertising.
2000	E-commerce collapsed and many e-commerce companies disappeared
2001	E-commerce re-grows and larger form of e-commerce, business-to-business has achieved about $700 billion in transactions.
2002	E-bay acquires PayPal for $1.5 billion
2003	Amazon.com post yearly profit
2007	R.H. Donnelly acquires Business.com for $345 million
2008	US ecommerce and Online Retail sales projected to reach $204 billion, an increase of 17 percent over 2000

There are number of payment methods introduced by e-commerce website, such as PayPal and credit cards. Thus, it ease Internet users to consume goods and services electronically, for examples, users can order groceries for home delivery, and order food as well through online. Users no longer use Internet for the purpose of looking for information; the usage of Internet has extended to allow users to shopping online without go shopping complex.

Related Sources:

Electronic commerce aka e-commerce history
Electronic commerce
History of Ecommerce
History and timeline of the World Wide Web's evolution