Saturday, June 14, 2008

The revenue model for Google, Amazon.com and eBay.


There are five sources of revenue model namely sales, transaction fees, subscription fees, advertising fees, and affiliate fees as well as other revenue sources. Sales revenue model is basically the revenue earned from sales of goods and services. It is main source of revenue for Amazon.com and eBay. Amazon.com earns revenue from its online bookstore that sells books, music CD, DVD, computer software, video games, electronics, and others that let its customers to sell used items. Infact, Amazon has started selling products under its own private label “Pinzon” mainly selling downloads exclusively in MP3 format. Whereas, eBay earns revenue through online auction and shopping whereby people and businesses buy and sell goods and services worldwide. It offers millions of collectibles, appliances, computers, equipment, vehicles, and other miscellaneous items that are listed, bought, and sold daily. EBay have opened its new eBay Express site, designed to work like a standard Internet shopping site to consumers with United States.

Commission that is received from the product's sale is known as transaction fees. Ebay adopt transaction revenue model as their primary income whereby the auctioneer is given a space to auction their items or products and will be charged an insertion fees. In other words, transaction fees will be received from those who are interested to post their product using the name of eBay. If the product is successfully sold, yet another commission will be received.

A subscription fee is a monthly or yearly fixed amount paid to get some services. It is designed to obtain up-front payments from customers that access to specific content or services. This subscription model attracts customers with services that enable them to maintain continuous contact with the company.

Advertising fees is derived from companies paying a fee to advertise their products on a portal
.Google a much known search engine earns almost 99% of its revenue mainly from advertising fees whereby the advertiser is charged once the user click on the advertisement which will link to the advertiser’s website. One of the Google’s offered advertising service is Google AdWords whereby the advertisers are allowed to present advertisements to people that are looking for information related to what the advertiser has to offer. This service is a pay per click advertising program of Google. Besides Google, Amazon.com also uses advertising fees to earn its revenue by allowing advertiser to publish their advertisement in their website.

An affiliate fee is a commission earned for referring new customers to the buyer. 1% of Google’s revenue comes from affiliate fees which provide a link on their website that highlights web address or images of an another website. Google earns a referral fee if a customer clicks on the link and purchases goods at the transaction site, registers for the site, or some other services for which a commission is paid. Besides Google, Amazon.com also uses this revenue model with other websites to generate side income. Basically, Amazon.com will receive a certain amount of fee when a visitor of advertiser site purchases an item through a link on their website. Similarly, Ebay also generate its income through affiliate revenue model mainly from three sources of business which are auctions, payments (PayPal) and communications (Skype).
In conclusion, the revenue model adopted by Google, Amazon.com and eBay varies according to the nature of the business.


Sources:
http://www.organicspam.com/google_revenue_model.asp
http://www.ebstrategy.com/mobile/articles/port_rev_mod.htm
http://en.wikipedia.org/wiki/Ebay
http://en.wikipedia.org/wiki/Amazon.com

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