Revenue models for Google, Amazon.com and eBay(week 3)

We are surfing the internet daily visiting various websites for different purposes. But well, all the websites need money to sustain and maintain themselves, such as server maintenance, employees' salaries, but how do they generate incomes?

From our studies we have known that E-commerce companies can generate revenues using methods in the revenue models which are:-

1. Sales - where revenue is generated from sales of goods or services
2. Transaction fees - where commissions are paid based on volume of transactions
3. Subscription fees - monthly or yearly fixed amount fees that have to be paid for some services
4. Affiliate fees - payments from advertisers for placing their advertisements on a website

Google

I believe that Google is one of the most well known and often used search engine in the world. Google provides Internet search, e-mail, online mapping, social networking and video sharing services. Some brief history about Google; Google was founded Larry Page and Sergey Brin in January 1996 when they carry out it as a research in Stanford University, California. The domain google.com was registered on 15 September 1997 and incorporated as a company in 1998. Google was listed in the public in August 2004 and continue to grow until today. As of March 31 2009, Google has 20,164 full-time employees.

Google is used mainly as a search engine(also most popular services, with 53.6% marketshare on the web), thus, 99% of their revenue is from advertising fees. Google AdWords(cost-per-click or cost-per-view advertising scheme advertising text and banners) allows web advertisers to place their ads alongside the search results when users are using the search engine.

Another Google's advertisement application is the Google AdSense, that allows web owners to display their ads on their own sites to generate revenue(pay-per-click or per-impression basis). Web owners that are enrolled can enable text, image, video advertisements on their websites and these advertisements are administered by Google.

amazon.com

Amazon.com, well, is a total different thing from Google. Amazon.com, being the U.S. largest online retailer, was founded in 1994 and went online in 1995. It was founded by Jeff Bezos and name the website after the world's biggest river. Amazon.com initially started as an online bookstore but the business started to diversify to selling products such as DVD, music CD, MP3s, computer softwares, video games, apparels, electronics, furniture, toys and even food!! It provides international shipping to certain countries.

Amazon.com is a classic example of an E-commerce website that generate revenue through sales. Being one of the few companies that started and popularized online shopping, Amazon.com attracted at least 615 million visitor yearly by 2008, 50 millions U.S. consumers monthly(sources: Compete.com) and generates revenue by selling books, DVD, CD, MP3s, electronics, etc.

Amazon.com also generate revenue from affiliate fees as well by gaining commissions for referring customers to third party sellers that list and sell their products on Amazon website. In the other way, these affiliates also place links to Amazon in their own websites linking to Amazon.com, and if referral sales occured, these affiliates will receive commissions in return from Amazon. It was estimated that Amazon has 900,000 members in its affiliates programs.

http://www.amazon.com/

eBay

eBay eBay, is a very common word that we can listen today. From what we have already known, Ebay as an online auction website, also functioning as an online shopping website too where people and businesses can buy and sell variety of goods and services worldwide from this website. There are millions of items that you can find from eBay ranging from collectible items to vehicles, either new or second hand items that are open for bidding.

This online auction website was founded in September 3, 1995 by Pierre Omidyar, a French-born Iranian computer programmer. eBay was listed publicly on September 21, 1998 and the founder became instant billionaire!! eBay also owns Paypal and Skype and has established localized websites in thirty countries.

eBay homepage

Unlike the main revenue models that Amazon.com and Google are using, eBay is using a totally different revenue model. eBay generates revenue from a number of fees:-

• Insertion Fee - Fees that are needed to pay when registered users want to list their items on the website for sales which are not refundable.
• Final Value Fees - Fees that are charged to sellers as commissions when sales occured.

To learn more about eBay sellers' fees in details, click here .

With a large base of users worldwide that sell their items and products on eBay, eBay generates a large pool of revenue from the fees that are charged to the sellers.

Other than that, Paypal (online payment and money transfer) that is owned by eBay, its payment system also has its own fees that contribute to eBay revenue.

Last but not least, eBay also has its own affiliates program that contribute to its revenue by earning the commissions from the affiliates's transaction fees.

From here I have listed down the three major E-commerce websites and contrasted their revenue models while included some brief history about the websites. Google.com, the world most popular search engine that rely on advertising fees to generate revenue. Amazon.com, the U.S. largest online retail shopping website that generate revenue through sales and affilates fee. Finally, eBay that generate revenue from the incurred sellers' fee, affiliates programs and acquired businesses such as Skype and Paypal. We cannot determine which can be the best revenue model but we can see from here E-commerce has proven to be successful if the right market is targeted and the right way is done.

Related websites and reference links:-

http://www.ebay.com/

http://www.amazon.com/

http://www.google.com/

http://en.wikipedia.org/wiki/Ebay

http://en.wikipedia.org/wiki/Amazon.com

http://en.wikipedia.org/wiki/Google