The merchant model encompasses both retailers delivering goods and services from a variety of manufacturers and manufactures who sell directly to the consumer. In this category, business styles can include bit vendors selling strictly digital products (such as iTunes), traditional retailers with an online presence in addition to physical storefronts (“click and mortars”), and manufacturing license sellers (such as software manufactures who license their physical product but retain ownership rights). Internet businesses structured according to the merchant model earn revenue in much the same way as a traditional business with a storefront. Additionally, many businesses operating according to the merchant model will also sell advertising space to generate additional revenue.
5. Manufacturer (Direct)
The manufacturer or “direct model”, it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. Cisco, the digital electronic parts manufacturer, has an online product catalog that is an example of the manufacturer’s direct model. An individual or business can go directly to Cisco’s website to purchase systems and parts, which allows Cisco to operate with fewer field sales representatives. Dell Computer also uses this business model, giving the consumer the ability to customize his computer according to his needs.
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites.
The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services.
Users are charged a periodic — daily, monthly or annual — fee to subscribe to a service. It is not uncommon for sites to combine free content with “premium” (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.For example: Content Services — provide text, audio, or video content to users who subscribe for a fee to gain access to the service.
The utility model is, at its heart, a “pay-as-you-go” service provider that charges based upon metered usage. It takes its name from the utility services, such as water and electricity, which have traditionally used this metered charge style. In some countries, ISPs are still billed as a metered service, with rates varying as usage increases or decreases. In a slight variation, some Internet businesses, among them Slashdot, operate as subscription utilities. In this utility variation, subscribers are charged a fee based upon number of website content pages viewed.