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Business Models and e-Commerce. Jason C.H. Chen Professor, MIS School of Business Gonzaga University Spokane, WA 99258 Widespread Use on . Button a 13 century invention, took 400 years Bicycle appeared in 1818 and took 50 years to catch on Telephone

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Business Models and


Jason C.H. Chen

Professor, MIS

School of Business

Gonzaga University

Spokane, WA 99258

widespread use on
Widespread Use on ...
  • Button
    • a 13 century invention, took 400 years
  • Bicycle
    • appeared in 1818 and took 50 years to catch on
  • Telephone
    • invented in 1876, needed 35 years to find the beginnings of a mass market
  • Television
    • took 26 years
  • PCs
    • took 16 years
internet society each media reach to 50 million
Internet Society –Each Media Reach to 50 Million
  • Radio 38 years,
  • Television 13 years,
  • Cable TV 10 years,
  • Internet users only took
    • 5 years to reach this goal.
business model vs revenue model
Business Model vs. Revenue Model
  • Business model is the architectural configuration of the components of transactions designed to exploit business opportunities.
  • Revenue model refers to “the specific ways in which a business model enables revenue generation.


business vs revenue model
Business vs. Revenue Model

Business Model

Revenue Model

Value creation

Value appropriation

It can be realized through a combination of

- subscription fees,

- advertising fees,

- transactional income (e.g., fixed transactional fees, referral fees, fixed/variable commissions, etc)

It describes the way in which a company enables transactions that create value for all participants, including partners, suppliers and customers.

what is business modeling
What is Business Modeling?
  • Business modeling is the activity of representing aspects of or concepts from the business in a diagrammatic notation or simulation, using an abstraction to reveal only the desired elements.
four key drivers
Four Key Drivers
  • 1. Efficiency
  • 2. Complementarities
  • 3. Lock-In
  • 4. Novelty
1 efficiency
1. Efficiency
  • Internet makes it possible to increase efficiency in several ways.
    • Information asymmetries between buyers and sellers
      • sellers provide information to buyer via Internet
      • reverse market (buyers …)

A business model can unlock hidden value by enhancing transactional efficiencies by enabling:

- reduced search costs, - transaction spped,

- reduced distribution costs, - reduced inventory costs, etc.

2 complementarities
2. Complementarities
  • Companies can leverage value creation for their products (and services) from other suppliers
    • be able to play a vital part in building online virtual communities.
    • be able to capture the benefits from combining online with offline business
3 lock in
3. Lock-in
  • The ability to prompt users to engage in repeat transactions
    • creating switching costs (from loyalty programs)
      • e.g., Amazon’s “one-click” ordering systems
      • free e-mail services
    • providing transaction safety
    • creating the perception of trust
    • providing customization and personalization
4 novelty
4. Novelty
  • Innovation has always involved the introduction of novel products or services or processes.
    • Internet offers limitless possibilities to innovate in the manner in which transactions are enabled - by introducing
      • new business and
      • revenue models

Table Internet Revenue Models

Table Properties of Digital Information that Influence its Economic Value

  • Companies are rapidly changing and evolving their business models in order to adapt to the rapidly changing market conditions.
    • Traditional or legacy firms may combine their online operations with existing offline business, are well positioned to
      • draw liquidity (I.e., transaction volume), and
      • take advantage of complementarities and
      • create lock-in