Question

As an executive of a small size IT training company you are exploring different e-commerce revenue models that may generate earrings for you if training services list down three revenue models AND explain any one?

Answer 1

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E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. These business transactions occur either as business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer or consumer-to-business

• Advertising Revenue Model
• Subscription Revenue Model
• Transaction Fee Revenue Model
• Sales Revenue Model
• Affiliate Revenue

In simple terms, eCommerce or electronic commerce business refers to selling, buying or making a transaction over the internet in the digital marketplace. The products or services are showcased through a website or mobile application through digital signage systems that are integrated with a secured payment gateway facilitating product purchase and financial transaction.

The e-commerce revenue model is usually considered in classifying eCommerce business as revenues denote the total amount of money that is being received by the company after trading its products or service with its customers. There is a range of options from where revenues can be generated including advertising, affiliate marketing, subscription and a lot more.

The industry never restricts the upcoming of any new way of generating revenue. Though we will stick to explain the basic five eCommerce Revenue Models with possible variations to the approach.

1.Advertising Revenue Model : - firms attract an audience by creating content or attracting interaction and engagement, and then sell access to advertisers.

An advertising-supported revenue model is a business approach that emphasizes the sale of advertising as a major source of revenue. This structure is most prominent in traditional broadcast and print media, as well as online media.

If you have a website, there’s some space on your page that another business would love to use to advertise. That’s the theory behind the ad sales revenue model.

One site opens up space for banner and display ads on its site, and an advertiser buys space on that site. Both parties get together through an ad display network that helps match ad source with advertiser.

Pros

The model works because it brings in additional revenue with very little investment of your money or time.

It’s also one of the easiest ways to generate a passive income. You basically rent out real estate on your website.

Large audience

If your property is able to command a large enough audience, advertising can provide a substantial source of revenue. A power law dynamic is in effect for digital media – the bigger you get, the more market share you command. Facebook and Google
took up 63.1% of U.S. digital ad revenue in 2017, and their share is projected to grow further in the next two years.

Advertising is sold in different unit types, CPM (cost per thousand) being the most enduring and prevalent. Other mechanisms for advertising: CPC (cost per click, such as Google), CPA (cost per action, such as Facebook’s engagement metrics or Amazon affiliate marketing).

Highly targeted audience

If you have a highly targeted audience, you can almost always find companies that want to pay to reach your readers and users. This is especially true if your users show a propensity to buy the products that your advertisers want to sell, and why Vogue still commands high rates.

Utility delivered in advertising

By providing an audience in search of things, so cleanly and effectively, Google was able to grow majority market share adopting the pay for performance or cost-per-click model of advertising. Google focused on delivering the highest utility in the industry, and has never wavered from that goal.

Context within your content

Advertisers pay more when the ad fits within the way your audience reads, watches, and engages with your content. It’s not the number and types of different advertising units that creates conditions for success, it’s the appropriateness and effectiveness of the ad within the context of the medium.

TV ads still have the highest ad rates in the business, with online video now frequently commanding higher rates that certain cable properties.

Cons

Ads are everywhere these days, and too many of them can hurt your search engine optimization (SEO) rankings or annoy your visitors. The last thing you want to do is turn away potential customers.

Trust Issues

The advertising model is under attack globally because of the failures of Facebook, Twitter, and potentially Google to limit fraud and election-influencing intervention. Now that consumers and regulators have become more aware of how these data-hungry business trade data and information in exchange for hyper targeted advertising, they are under scrutiny. Many posit that the advertising business model itself is to blame.

Tradeoff Between Ad Customers and Users

The biggest challenge with a primarily ad-supported revenue model is that it forces constant trade offs between the goals of the advertisers and the goal of the users. Your audience is not at your site or media property to look at your ads, but you have had to make decisions about how to deliver ads to them in a way that does not compromise their experience.

Chasing Clicks at the Expense of Quality

A frequent complaint heard at even established media companies is the pressure to chase clicks with listicle article formats, bait and switch titles, 100 page slideshows, and the ever popular clickholes.

Serving an Arbitrator

For publishing and content sites that rely on ad exchanges or programmatic advertising, there is a price. These exchanges charge a cut of the advertising, so while the revenue arrives without the need for a sales person, the publisher is often at the whim of the exchange. Ad exchanges and programmatic technology can also challenge the user experience. When you have a page loading problem on a media site, you can see exchanges at work, cranking away, tracking user information across the web and finding the highest advertising bid to serve to you.

Low Barrier to Entry, High Barrier to Early Revenue

Anyone can start a publishing site, or launch a video blog (vlog). Few make substantial revenue from these activities, because of the advertiser needs of scale and audience. Early stage startups are challenged when they propose ad-supported models and encouraged to launch first, get big, figure out advertising later. Advertising is a long game.

Downward Pricing Pressure, Inventory Approaching Infinity

The number of indexed pages on the web continues to expand, affecting ad rates everywhere. Real time bidding, ad networks and exchanges, and other automated channels are creating extremely efficient ad spends, which benefits the advertiser, not the publisher.

Benefits

• Users receive free or highly subsidized content or communications.
• Advertisers find their exact customer with the benefit of improved data-driven targeting
• Internet-based advertising has the promise of delivering provable ROI

Challenges

• Users may not be willing to give up critical data to get the benefit of a free service
• Post Cambridge Analytica, users now aware how their interactions and personal data is traded in the digital advertising and data industry

Trends in Advertising

Regulatory Threats

In response to the Facebook and Twitter ad election scandals of 2016, these companies are at risk of further regulation. The EU has already increased privacy requirements with the introduction of GDPR. In the US, if there is an expectation that Facebook, Google, and Twitter are now responsible for the user-generated content, the cost to delver these “free” ad networks will substantially increase.

Apple Enabling Ad Blocking

Recent iPhone and iPad software upgrades enabled developers to make Apps that remove advertising and tracking from the web. On purpose. This is likely the biggest potential threat to advertising-supported business models everywhere, because of the worldwide exponentially fast adoption of mobile. If your company depends on advertising revenue, and your product is increasingly experienced on a mobile device, well then you have a problem.

Programmatic Advertising

Since the launch of ad networks and programmatic advertising, advertisers can now be more efficient in finding the audience that you are cultivating. Programmatic advertising is the newest way purchase a target audience rather than a specific ad placement, often using an automated bidding process. Agencies need fewer media buyers, and publishers need fewer ad sales staff to execute programmatic advertising.

How it works: if the site attracts the younger demographic of people who are intent on purchasing a car, which is known from all of their associated online and offline behavior, a car ad will be bought on action and placed to the highest bidder. However there have been user experience consequences to this model: reduced load times for users, and mobile ads that are considered exceptionally annoying within mobile browsing. These compromises may therefore limit the effectiveness (or even appearance) of programmatically-delivered ads.

Native Advertising

Native advertising, formerly branded content or advertorial content, is one of the fastest growing types of ad revenue. Native ads are designed to match the form and function of the user experience in which it is placed. Native ads help overcome ad blocker technology (since the ads are typically in the format of content consumed and do not appear as ads) and mobile advertising challenges (ads are consumed in the stream vs. in the frame of a site).

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