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Internet Marketing. Web Business Models. Do You Yahoo?. For 50% of US Web users: YES!!! A phenomenal Silicon Valley success story Yahoo! brand extensions provide value add for users Yahoo! games Yahoo! clubs Yahoo! chat Yahoo! auctions Yahoo! Stores

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Internet marketing
Internet Marketing

Web Business Models

Do you yahoo
Do You Yahoo?

  • For 50% of US Web users: YES!!!

  • A phenomenal Silicon Valley success story

  • Yahoo! brand extensions provide value add for users

    • Yahoo! games

    • Yahoo! clubs

    • Yahoo! chat

    • Yahoo! auctions

    • Yahoo! Stores

  • Yahoo! leverages its brand and ability to draw traffic to generate multiple revenue streams

Most popular web sites yahoo leads
Most Popular Web SitesYahoo! Leads

Figure 5.1

Yahoo brand extensions the success of the yahoo brand
Yahoo! Brand ExtensionsThe Success of the Yahoo! Brand

Figure 5.2


  • Web benefits to firms

  • Closed loop marketing

Web benefits to firms
Web Benefits to Firms

  • The range of Web benefits

    • Business models can be based on improvements in product or service

    • Business models can be based directly on generating revenue

  • Let’s take a closer look at these broad classes of business models

Improvement based biz models

Build brand

Build category

Enhance quality

Reduce costs

Free trial

Improvement-Based Biz Models

Use the Net to Improve Products & Services




  • Support dealers

  • Support suppliers

  • Collect information

Before we look at revenue based biz models let s take a look at some recent headlines
Before We Look at Revenue-Based Biz ModelsLet’s Take A Look At Some Recent Headlines



Name of Publication - Date

Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that profiles a company and its business model. I usually take excerpts out of the lead paragraph, and highlight keywords. I’ve found articles on the accumulating losses of a number of e-tailers that provide an interesting introduction to the subject of making money on the Web.

Revenue based biz models



Banner advertising

Prospect fees

Sales commissions

Revenue-Based Biz Models

Use the Net to Make Money

Provider Pays

Payment mechanisms

Prospect Fees

Click Through

Banner Ads



Fixed Payment

Sales Commissions


Risk Increases for the Web Site Being Paid

Payment Mechanisms

Which Company Bears the Risk?

  • Sponsorship least risky: fixed payment

  • Banner Ads: payment depends on impressions

  • Prospect Fees & Sales Commissions: depend on success of site and advertiser

The many ways to pay online

Figure 5.8

The Many Ways to Pay Online

Bargaining power determines who bears risk
Bargaining Power Determines Who Bears Risk

  • Powerful sites shift risk to advertisers and demand sponsorships

  • Powerful advertisers demand accountability and negotiate for prospect fees of a share of transaction revenue

Revenue based biz models1



Banner advertising

Prospect fees

Sales commissions

Product sales



Bundle sales

Revenue-Based Biz Models

Use the Net to Make Money

Provider Pays

Customer Pays

Building value bundles via alliances
Building Value Bundles via Alliances

  • The Internet makes it easy to bring a wide range of resources together on a single site

  • Fast, cheap way to build a product or service offering (whole product)

  • A visit to any search engine illustrates

Note: At this point in the lecture, it’s helpful to go to one of the major portals and identify sponsorships, alliances, affiliates, advertisers

Alliances a marketing challenge
AlliancesA Marketing Challenge

  • Screen real-estate:

    • how big will my logo be?

    • where will it appear?

    • exclusive deal?

  • Revenue sharing

  • The deal you can make depends on the bargaining position of each partner

Q: Are these Biz Models mutually exclusive?


  • Companies try to generate revenues any way they can

  • Multiple revenue models are combined on the same site

Closed loop marketing
Closed Loop Marketing

  • Marketing is closed loop when specific customer responses to specific marketing actions can be tracked

    • For example: if an online ad encourages Web site registration, the campaign is closed loop if users can be tracked from ad exposure to the decision to register

  • Closed loop marketing leads to rapid learning

    • Marketers can experiment with prices, ad copy, and product features on selected samples of consumers

The impact of closed loop marketing

On the Internet

Nobody Knows

You’re A Dog

Figure 5.10

The Impact of Closed Loop Marketing

  • Marketers want two results from user responses

    • They want consumers to make a choice that leads to

      • information

      • improved customer satisfaction

      • a transaction

    • Marketers want to learn about visitors to their site

Web chains
Web Chains

  • A Web chain is a click sequence

    • Can be as short as a single click

    • Can be as long as all possible choices on a Web site

      • Decision points = event nodes

      • Ending point = result node

  • Common Web chain starting points

    • Company homepage

    • Search engine or portal

    • Banner ads

Web chain of events


No Notice Rate (NNR)

E1: Views Page with Paid Link


R2: Notices Ad but doesn’t click = Ad brand impact

Click-through Rate (CTR)

E2: Clicks Through to Company Web Site = Prospects

Prospect Conversion Rate (PCR)


New Customer (1-RR)

E3: Views Web Site but Doesn’t Buy

E4: Visits Web Site and Buys

Repeat Buyer (RR)


R5: New Customer = (Ad brand + Web Site brand + Online profit + Future lifetime value)

R4: No Immediate Purchase = (Ad brand + Web Site brand impact)


E5: Loyal Customer

R6: Would have bought offline anyway = (Ad brand + Web Site brand + Online profit – Offline profit)

R7: Only buy online = (Ad brand + Web Site brand + Online profit)

Offline Buy Rate (OBR)

Online Only (1-OBR)

Web Chain of Events

Figure 5.12

R1: Doesn’t Notice Ad = $0 benefit

Offline Induced Buyer (OIB)

R3: Offline Purchase = (Ad brand + Web Site brand + Offline profit)

Evaluating web chains
Evaluating Web Chains

  • Enables marketers to evaluate a wide range of Web strategies and tactics

  • Calculate

    • expected value of an impression

    • expected value of a prospect

    • expected value of a new customer

    • expected value of a repeat buyer

Web chain benefits and probabilities five main benefits occur in the chain
Web Chain Benefits and ProbabilitiesFive Main Benefits Occur in the Chain

  • Online contribution: the incremental profit from an online sale

  • Offline contribution: incremental profit from the sale of products through the standard channel

  • Ad-brand impact: value to a visitor, who sees the ad but doesn’t click through

  • Web site brand impact: value of a visit to the Web site that results in benefits, but not a sale

  • Lifetime customer value: future value of profits from a new customer

Cost and performance
Cost and Performance

Table 5.5

One of the best uses of Web chain analysis is to compare alternative methods of acquiring customers

From web chains to closed loops
From Web Chains to Closed Loops

  • There’s a strong connection between Web chains and closed-loop marketing

  • A Web chain is closed loop if

    • the chain extends from the marketing offer to the desired marketing response

    • Each step is trackable

  • The Internet can be used to close the loop on traditional media advertising if unique identifiers are included with the ad

    • Dell newspaper ads contain a unique code