Guide to Online Business Model Types
by Larry Slusser on February 22nd, 2008
During the 1990’s, the term business model became very popular amongst online businesses. However, the plans did not have a clear focus on how traffic to their sites would generate revenue and profits. In order to determine where you are and where you are going, a business model should include sales, costs, profits and expenses, along with strategic goals, a vision and mission.
There are numerous business models for internet businesses. Some websites focus on sales, other focus on reducing costs or improving customer satisfaction. Whatever the reason, there is a reason for you developing an online business; therefore, you should be able to attain a payoff for your efforts.
There are several different ways to make a profit from your online business:
Portfolio Site - this model operates much like a business card on the web by offering information to target users about a business. In essence, they generate leads either for themselves or for another business by providing information to help aid the visitor’s buying decision.
Commerce Site - The basic commerce model is focused on making sales and profits. This is your basic e-tail store, where orders for products are taken on the website, customers are charged for those products, and then they’re shipped. This model can also apply to downloadable products, such as e-books or web-based applications.
Content Site - Another model is the content model, where it is based solely on advertising, such as banner advertising and sponsorships. For instance, the content is free to users, but is paid for through the companies advertising on the sites. A search engine like Google is considered a content model, because the content is free and paid for with advertising. This is not a new business model - many newspapers and magazines operate in this way.
There are also the community sites, where it does not cost anyone to either post or browse, but the business is responsible for the upkeep. The sites usually offer email, bulletin boards and forums. The site is commonly sponsored by a store that supports the community interest.
Most sites are a combination of different models in order to build traffic and visitor loyalty. A good example of this would be Yahoo, which combines content, community and commerce.
When determining the type of business model for your online business, think about how you will measure the visitors to your site and the money generated - either by sales or advertising. Determine your sales forecast based on the website’s benefits, if you will try to increase the closing percentage, customer satisfaction or retail traffic. Once you determine your sales forecast, then you will be able to compare it to the monetary benefits and expenses.