Lecture 2-Analysing Internet Business Models

Analyzing Internet
Business Models
Sumeet Gupta
Outline
¡ Taxonomy of Business Model
¡ Apprising the Profitability Potential of a Business Model

¡ VARIM Framework
¡ Who Profits from an Innovation

¡ Teece Model
¡ Value Configurations and the Internet

Taxonomy of
Online Business
Models
Categorization of Business
Models
¡ Generic value-chain position (e.g., platform, franchisee, OEM)
¡ Revenue-collection approach (e.g., subscription, “razor and

blades,” rental)
¡ Value-adding approach (e.g., matchmaking, “long tail”

aggregation, outsourcing, multi-level-marketing, auction)
¡ Broad industry sector (e.g., professional services, packaged

goods, creative industries)
¡ Strategic positioning within an industry (e.g., software-as-a-

service, low-cost airline, free-commuter newspaper, fashion
designer, “fabless” chipmaker, art gallery)
Categories based on
Revenue Generation Logic
Categories based on
Revenue Generation Logic
Model Definition Examples Sustainability
Commission Fees levied on Travelocity, IndiaMart, Groupon, Volume / Expensive Transactions

transactions based on the Ola, Uber, Priceline, Classifieds,
size of the transaction Matchmakers
Advertising End users subsidised by MSN, Times of India, Buy.com, Reaching the broad audience / Having
advertising Mouthshut.com targeted or specialized audience
Mark-up Based Value added in sales Amazon.com, LL Beans, Subject to Competitive Pressures
Walmart, iTunes
Production Based Value added in production Dell Direct, Sony Entertainment Economies of Scale in production
Referral / Affiliate Fees for referring Autobytel Short lived models

customers to a business
Subscription Based Fees for unlimited use BSNL, Wall Street Journal Valuable and interesting content / Feasible in
segments with little or no competition. Do
not sustain due to competitive pressures.
Fee-for-service Fees for metered service Fedex, Amazon web services, Large volume of customers / intensive usage
Google cloud. of service
Commission Based Models
¡ Fees levied on transactions based on the size of the transaction
¡ Variants
¡ Transaction Broker, Market Exchange, Buyer Aggregator, Distributor
Broker, Virtual Mall, Metamediary, Auction Broker, Reverse Auction,
Classifieds, Matchmaker
Enables
Commission Based Models Consumers to
Consummate
Transaction Broker transactions
Transaction Broker
¡ Travelocity.com
¡ Started by American Airlines in 1996
¡ Allows customers to access, reserve, book and purchase tickets
without the help of a travel agent or broker
¡ Tickets of Airlines, hotels, rental cars, cruises and packaged vacations
¡ Mergers and Acquisitions
¡ Merger: AOL’s travel portal in 1999
¡ Merger: Preview Travel in 2000
¡ Acquired Site59.com in 2002
Transaction Broker
¡ Travelocity.com
¡ Value Proposition: Disintermediation of Traditional Brokers
¡ Revenue Model: Commission on Transactions
¡ Pricing Strategy: Fixed Pricing
¡ Profit Site: Broker / Agent
¡ Target Market: All Travellers
¡ Capability
¡ Resources: Subsidiary of American Airlines thus having deep
pockets
¡ Competitive Advantage
¡ Sustainability Strategy
¡ Growth through mergers and acquisitions
Commission Based Models Facilitates
transactions
Market Exchange / B2B Hub between
businesses
Market Exchange / B2B Hub
¡ Indiamart.com
¡ Value Proposition: Enables small and medium size businesses
¡ Generate business leads (online catalogs / store fronts)
¡ Establish their credibility (third party verified trust profile)
¡ Use business information (finance, news, trade, shows tenders) for
business promotion
¡ Revenue Model:
¡ Website design and hosting services for businesses
¡ Listing (Premium, paid listing) and Banner Advertising fee
¡ Pricing Strategy: Fixed Pricing
Market Exchange / B2B Hub
¡ Indiamart.com
¡ Target Market: Indian SMEs
¡ Capability
¡ Resources: Generates lock-in by building and hosting websites for
small businesses
¡ Value-Added services
Facilitates
Commission Based Models Purchasing
Consortia
Buyer Aggregator and their
buying power
Buyer Aggregator
¡ Groupon.com
¡ Launched in Nov. 2008 in Chicago City
¡ Has grown steadily through acquisitions in various countries
¡ In India it acquired sosasta.com in Jan. 2011
¡ Daily group coupons
Buyer Aggregator
¡ Groupon.com
¡ Value Proposition
¡ Bulk discounts to individual customers
¡ Arguably build a loyal customer base for sellers but usually attracts only
bargain hunters
¡ Strong deals: E.g., $50 for $100 worth of apparel at an upscale clothing
store
¡ Revenue Model: Makes money by keeping half the money of discount
¡ Pricing Strategy: 50% of discount
¡ Target Market: Any user
¡ Capability
¡ Has been posting losses since beginning
Connects
Commission Based Models Manufacturers
with large
Distribution Broker volume
producers
Distribution Broker
¡ Grainger.com
¡ Launched in 1927 as an Industrial Supply Distribution company
¡ Grainger's catalog includes such offerings as motors, lighting,
material handling, fasteners, plumbing, tools, and safety supplies.
Distribution Broker
¡ Grainger.com
¡ Helps Business with purchasing supplies, managing inventory etc.
¡ Revenue Model: Transactions
¡ Pricing Strategy: Fixed Discount
¡ Target Market: Business
¡ Speed and Convenience of doing business
Links or hosts
Commission Based Models many
merchants
Virtual Mall / E-Mall through a
shopping
interface
Virtual Mall / E-Mall
¡ Shopping.yahoo.com
¡ A large number of users / people who flock to yahoo.com
¡ Revenue Model: Seller’s listing on site
¡ Target Market: Businesses / Customers
Virtual mall
Commission Based Models that also
provides
Metamediary transaction
and clearing
services
Metamediary
¡ Amazon.com z-shops
¡ A large number of users / people who flock at Amazon.com
¡ Revenue Model: Commission on Sales
¡ Target Market: Businesses
¡ Strong base of customers on Amazon.com
Facilitates
Commission Based Models auction and
charges
Auction Broker commission
to sellers
Auction Broker
¡ eBay Auctions
¡ Facilitating auctions by bringing buyers and sellers together
¡ Revenue Model: Commission from sellers on auction
¡ Target Market: Individual and Businesses
¡ Capabilities: First Mover Advantage in setting auctions, Deep
Pockets and presence in various countries
¡ Retention of user base by providing new-value-added services
Facilitates
Commission Based Models auction for
buyers
Reverse Auction
Reverse Auction
¡ Priceline.com
¡ Facilitating buyers to name their own price
¡ Revenue Model: Commission from buyers on winning the bid
¡ Target Market: Individuals / Businesses
¡ Capabilities: First Mover Advantage in setting reverse auction
¡ Patented name your own price model
¡ Also developed transaction based model for selling hotel rooms,
airline tickets etc.
Individuals
Commission Based Models advertise to
sell goods or
Classifieds services
Classifieds
¡ Olx.com
¡ Facilitates individual’s buying and selling
¡ Revenue Model: Advertising and Paid listings
¡ Target Market: Individuals
¡ Capabilities: Linked to social networking site friendster.com that helps
bring community together
¡ Big community of users
Helps making
Commission Based Models match
between two
Matchmaker parties
Matchmaker
¡ Shaadi.com
¡ Facilitates matchmaking between two parties
¡ Revenue Model: Parties pay when they place an expression of
interest
¡ Target Market: Individuals
¡ Capabilities: First Mover Advantage in setting matchmaking site
¡ No Costs
¡ Strong user Base
Advertising Based Models
¡ End users subsidized by Advertising, Charges fees for banners,

permanent buttons, pop-up windows etc.
¡ Variants
¡ Generalized Portal, Personalized Portal, Specialized Portal, Attention /
Incentive Marketing, Free Model, Infomediary Registration Model,
Recommender System, Bargain Discounter, Community Provider
Broad Content
Coverage
Generalized Portal Large and

Diffuse
Audience
Generalized Portal
¡ msn.com
¡ Large number of visitors to the site
¡ Revenue Model: Advertising from different parties
¡ Capabilities: Content coverage
¡ Strong user Base
Advertising takes different forms and sometimes forced (interstitial)

such as in Times of India’s Videos or that in You Tube Videos
Advertising Based Models Generalized
portal
customized to
Personalized Portal user preference
Personalized Portal
¡ my.yahoo.com
¡ Targeted advertising according to the audience
¡ Revenue Model: Advertising
¡ Capabilities: Content coverage and Personalization as desired by
the user
¡ Latest content offered on the personalized page
Focus on narrow
audience with
much deeper
Specialized Portal / Vortals coverage
Specialized Portal / Vortals
¡ Neopets.com
¡ Gaming Experience for kids
¡ Capabilities: Specific Content coverage
¡ Specific Community of people
Company pays
user for viewing
specific content
Attention / Incentive Marketing (My Points)
Attention / Incentive Marketing
¡ Ojooo.com
¡ Surety that ads are viewed by viewers
¡ Capabilities: Attracts people for watching ads
Service /
Product is given
for free
Free Model
Free Model
¡ Timesofindia.com
¡ Large audience that watch news
¡ Capabilities: Attracts people for watching news
¡ Changing Content of interest that attracts visitors
Company sells
good at deep
discount to
Bargain Discounter attract traffic
which then
enables ad
revenues
Bargain Discounter
¡ Rakuten.com
¡ High traffic
¡ Capabilities: Attracts people for deep discounts
¡ Questionnable?
Service is free
Advertising Based Models but the user
must register so
Infomediary Registration Model that the

company can
track usage
details
Infomediary Registration Model
¡ Nytimes.com
¡ High traffic
¡ Capabilities: Attracts people for service and tracks usage
¡ Sustainability
¡ Changing Content
Service is free
Advertising Based Models but the user
must register so
Recommender System that the

company can
track usage
details
Recommender System
¡ Mouthshut.com
¡ High traffic for people looking for product reviews
¡ Capabilities: Attracts people for service and tracks usage
¡ Sustainability
¡ Product reviews are always necessary for purchasing products
Users of Interest
Advertising Based Models on Specific
Communities
Community Provider / Virtual Comm.

Community Provider / Virtual Comm.
¡ TimeZone.com
¡ Specialized audience
¡ Capabilities: Specific Content coverage
¡ Community of Interest
Markup Based Models
¡ Value added in Sales, Usually either wholesaler or retailer
¡ Variants
¡ Virtual Merchant, Catalogue Merchant, Click and Mortar, Bit Vendor
Pure-play
Markup Based Models Internet e-tailer
Virtual Merchant
Markup Based Models
Virtual Merchant
¡ Amazon.com
¡ Savings by removal of intermediaries
¡ Target Market: Individual customers
¡ Capabilities: Large number of products, Relationships with Suppliers
¡ Building on Complementary assets, establishing z shops,
warehouses for fulfillment and innovation in services provided
Traditional
Markup Based Models Catalogue
company that
Catalogue Merchant also sells and

fulfills order over
the Internet
Markup Based Models
Catalogue Merchant
¡ Llbean.com
¡ Ease of ordering and fulfillment of products
¡ Capabilities: Catalogues products, Relationships with Suppliers,
Established buyer base
¡ Moving online
¡ Value-added services
¡ Efficiency of procurement and fulfillment
Traditional Store
Markup Based Models that also sells on
Internet
Click-and-Mortar
Markup Based Models
Click-and-Mortar
¡ Walmart.com
¡ Established brand, low priced products
¡ Capabilities: Large number of products, Relationships with Suppliers,
Buying Power
¡ Strong buying power in the supply chain
¡ Established warehouses and offline stores
Sells digital
Markup Based Models products on
Internet
Bit Vendor
Markup Based Models
Bit Vendor
¡ Apple’s itunes Store

¡ Music and Apps available for download
¡ Capabilities: Brand
¡ Latest apps and itunes in the store
Production Based Models
¡ Value added in Production through Economies of Scale
¡ Variants
¡ Manufacturing Direct, Content Producer, E- procurement,
Networked Utility Provider, Brand Integrated Content
Sells directly to
Production Based Models end-user
customers
Manufacturer-Direct
Manufacturer-Direct
¡ Dell.com
¡ Mass Customization
¡ Capabilities: Brand and Fast Delivery, Close Relationships with
suppliers
¡ Strong model requiring significant investment in complementary
assets as well as relationships
Produce and
Production Based Models sell the content
on Internet
Content Producer
Content Producer
¡ Sony Entertainment
¡ Latest Entertainment Content
¡ Capabilities: Production of Entertainment Content
¡ Strong Brand, Deep Pockets, Strength in offline retailing of
entertainment content
Tendering and
Production Based Models procuring of
goods over
E-Procurement Internet
E-Procurement
¡ Sail’s e-procurement (metaljunction.com)

¡ Efficient processing of tender and purchases
¡ Capabilities: Traditional purchasing
¡ Power in the Supply chain, Integrated SAP in the Company
¡ Buyer led procurement model
Providing utility
Production Based Models based on
connection
Networked utility Provider between a user

and a site or
different users
Networked utility Provider
¡ Adobe Online Form’s

¡ Easy development, filling and submission of online forms for survey
and other purposes
¡ Target Market: Businesses and Individuals
¡ Capabilities: Brand Name
¡ Software development
¡ Cloud based offering
Referral / Affiliate Models
¡ Fees for Steering Visitors to a Business. Affiliate revenue is

generated by allowing affiliates to display the content of other
businesses
¡ Variants
¡ Pay-per-Sale (Flat fee or a %age of transaction)
¡ Pay-per-Click (Fee based on Click)
¡ Pay-per-Lead (Fees for generating leads)
Collects data
Referral / Affiliate Models from customers
and then use
Lead Generator the data to

steer businesses
toward the
customers
Referral / Affiliate Models
Lead Generator
¡ AutoByTel
¡ Customer information generated through the website is sold to
various sellers
¡ Capabilities: Customer Base
¡ Value-added services through reviews, tips, comparisons etc.
Subscription Based Models
¡ Fees for Unlimited Use
¡ Variants
¡ ISPs / OSPs, Last Mile Operators, Content Creators
Internet Access
Subscription Based Models and other
value-added
ISP / OSPs services

ISP / OSPs
¡ bsnl.co.in
¡ All kinds of Telecom related services
¡ Capabilities: Brand Name / Govt. Company
¡ Value Added services
¡ Low Cost market
Last mile access
Last Mile Operators
Last Mile Operators
¡ Hathway.com
¡ Fast Broadband speed at low cost
¡ Cost Cutting or cost savings in business processes
Value-Added
Subscription Based Models Information and
Entertainment
Content Creators on Subscription

Content Creators
¡ Wall Street Journal

¡ Business News with Analytics at cheap rate
¡ Analytics
Fee-for-Service Based Models
¡ Fees for Metered Service
¡ Variants
¡ Service Provider, B2B Service Provider, Value Chain Service Provider,
Value Chain Integrator, Audience Broker, Collaboration Platform
Provider, Application Service Provider
Selling services
Fee-for-Service Based Models rather than
product on
Service Provider Internet

Service Provider
¡ Sendthisfile.com
¡ Sending large files on Internet
¡ Poor as the model is easily imitable
Supports
Fee-for-Service Based Models businesses by
selling services
B2B Service Provider to other

businesses
B2B Service Provider
¡ Employeematters.com
¡ Conducts Workshops for employees
¡ Capabilities: Experienced instructors
¡ Experience in conducting workshops for employees
Specializes in
Fee-for-Service Based Models one specific
piece of value
Value Chain Service Provider chain

Value Chain Service Provider
¡ Fedex.com
¡ Specialization in efficient and visible logistics
¡ Capabilities: Logistics Fleet, IT enabled logistics
¡ Network of logistics
¡ Relationships with affiliates
Focus on
Fee-for-Service Based Models integrating
multiple steps of
Value Chain Integrator the value chain

Value Chain Integrator
¡ Exel Logistics
¡ Manage integration within the supply chain
¡ Capabilities: IT enabled logistics
¡ Relationships with existing players
Companies that
Fee-for-Service Based Models manage
collaborative
Collaboration Platform Providers platform and sell

collaboration
tools
Collaboration Platform Providers
¡ Vastera (Livingston)
¡ Manage software for collaboration with business partners
¡ Capabilities: IT enabled logistics
¡ Relationships with existing players
Rents software
Fee-for-Service Based Models applications to
business
Application Service Providers

Application Service Providers
¡ Google Cloud
¡ Access everywhere anytime
¡ No need to purchase software
¡ Capabilities: Cloud Based Offering, Secure and efficient servers
¡ Value-added services
¡ Large space online
¡ Secure processing of files
Collects
Fee-for-Service Based Models information on

consumers and
uses it to help
Audience Broker advertisers
target their
audience
Audience Broker
¡ DoubleClick Acquired by Google

¡ Information about people to businesses
¡ Capabilities: Relationships with information providers
¡ Accurate, fast and reliable information
Sustainability
¡ Commission Based - Volume / Expensive Transactions

¡ Advertising Based - Reaching the broad audience / Having
Targeted or specialized audience
¡ Mark-up Based – Subject to Competitive Pressures
¡ Production Based - Economies of Scale in production
¡ Referral Based - Short lived models
¡ Subscription Based - Valuable and interesting content / Feasible in
segments with little or no competition. Do not sustain due to
competitive pressures.
¡ Fee-for-Service Based - Large volume of customers / intensive
usage of service
Profitability of
Internet Business
Models
VARIM Framework
VARIM Framework
¡ Value - Adaptability - Rareness – Inimitability – Monetization

framework
¡ Derived from
¡ Resource-Based View
¡ Dynamic Capabilities View
¡ Product-Market Positioning
VARIM Framework
¡ Resource-Based View
¡ Firms resources give it sustainable competitive advantage
¡ Resources must be Valuable, Rare, Inimitable and Non-substitutable
¡ Dynamic Capabilities View (Agility)

¡ Focuses on the issue of competitive survival in response to rapidly
changing contemporary business conditions
¡ Competitive-Positioning View
¡ For gaining sustainable competitive advantage. Three generic types:
¡ Cost-Leadership
¡ Differentiation
¡ Focus (Niche / Mass market)
VARIM Framework
ADAPTABILITY
Is the business model-or core parts
of it-cost-effectively reconfigurable
or re-deployable to offer benefits
that customers perceive as valuable
to them?
VALUE RARENESS
MONETIZATION
Does the firm make, Is the firm the only one
Does the Business
or stand to make, that offers the
Model offer benefits
money from offering customers benefits? If
that customers perceive
the benefits to not, is the firm’s level of
as valuable to them?
customers? the benefits higher than
that of competitors?
Source: Afuah, A. (2014),

IMMITABILITY
Business Model Innovation: Are the benefits difficult for other
Concepts and Cases, First firms to imitate, substitute or
Edition, Routledge Books, leapfrog?
London, UK
VARIM Framework
¡ Value (Quality of Resources and Activities)

¡ Is a function of the quality of underpinning capabilities – Resources
and activities
¡ Resources: The Team, Brand, Reputation and Network effects, if
any, exhibited by the product
¡ Activities: Low Cost, Differentiation, or Focus
VARIM Framework
¡ Adaptability (Resources / Capabilities of a firm)

¡ Can the business model or parts of it be cost-effectively reconfigured
or re-deployable to offer benefits that customers perceive as
valuable?
¡ Brands, Channels and shelf-space can be reconfigured
¡ Design activities of a company can be reconfigured
¡ E.g., Dell’s Direct to customer model
¡ Can be measured at some level by:
¡ The number and diversity of new products (benefits) that the firm
has been able to offer,
¡ The level of “improvement” in the benefits that customers
perceive, and
¡ Revenues from new products
¡ Flexibility of capabilities
VARIM Framework
¡ Rareness (How Rare is the Value provided by the firm?)

¡ Firm is not likely to make much money if many other firms offer the
same benefits to customers. Can be measured by:
¡ Number of competitors or firms with similar / substitute products
¡ Level of the benefits from firm compared to those from
competitors
¡ Inimitability
¡ Firm will continue to make money only as long as the benefits are not
imitated, substituted, or leapfrogged. Can be measured by:
¡ Number of imitators
¡ Inimitability of resources
¡ Inimitability of activities
VARIM Framework
¡ Monetization (Setting the Price Right)

¡ Return on sales or any other measure of profitability
¡ Right pricing
¡ Importance and value of complementary assets
¡ Number of customers with a high willingness to pay
¡ Number and quality of sources of revenues
¡ Cost structure
¡ Industry attractiveness and firm’s positioning in it
Who Profits from
an Innovation
TEECE MODEL
Teece Model
¡ Proposed by Prof. David Teece, Univ. of California at Berkeley
¡ Puzzled by how EMI, the original inventor of CAT Scan, could not
profit from its innovation, but GE and Siemens did
¡ He argued that to make money from an invention or discovery,

two factors are important:
¡ Complementary Capabilities
¡ Imitability
Teece Model
¡ Capabilities
¡ Resources
¡ Tangible (Asset on the balance sheet: plants, machinery, cash
etc.)
¡ Intangible (Brand name, patents, copyrights, trade secrets etc.)
¡ Organizational (Know-how, tacit knowledge, routines, processes)
¡ Activities (Such as R&D, Manufacturing, marketing etc.)
¡ Relational Capabilities / Social Capital (Relationship with co-
opetitors, network effects, access to finance)
¡ Capabilities for profiting from an innovation

¡ Invention (New way of doing things)
¡ Complementary (other capabilities): All resources beyond those that
underpin the invention or discovery that a firm needs to create and
capture value in the face of an innovation
Teece Model
Source: Teece, D.J. (1986). Profiting from Technological Innovation: Implications for integration, collaboration,
licensing and public policy. Research Polity, 15(6), 285-306.
Teece Model
Determining One’s Complementary Assets

¡ First, the firm should understand what product-market position it
occupies or wants to occupy.
¡ the customer value, scope, and positioning (relative bargaining position vis-à-
vis co-opetitors) that a firm attains or wants to attain.
¡ Second, the firm should understand its value configuration (value

chain, value network, or value shop) and determine what capabilities,
other than the technology, are critical not only to offering the right
customer value to the right market segments but also to increasing the
firm’s relative positioning vis-a-vis suppliers, customers, and
complementors.
¡ Do the complementary assets make an unusually high contribution to the
value that customers perceive? and
¡ How quickly and to what extent can other firms duplicate or substitute the
complementary assets?
Teece Model
¡ Limitations
¡ Leaves out other determinants of appropriability such as a firm’s
position vis-à-vis coopetitors in an attractive market, pricing strategy,
sources of revenues and the activities that increase the number of
customers that buy a particular product.
¡ Although an inimitable product and scarce important complementary
capabilities can give them some bargaining power over customers
but they may not give bargaining power over suppliers,
complementors, or customers with monopoly power in their industry.
¡ Even where a firm has unchallenged power over its coopetitors, it may
still leave money on the table, if it has a wrong pricing policy
Teece Model
¡ Sometimes capabilities can be handicap

¡ Capability may prevent a company to engage in an innovation
¡ E.g., Compaq unable to copy Dell’s direct-to-order model
¡ Engages in innovation but fails because of pre-innovation
capabilities
¡ E.g., Blockbuster’s offline rental stores led it to Bankruptcy when
Netflix opened its online movie rental store.
Value
Configurations
and the Internet
Value Configurations
¡ Companies are mainly concerned with creating value in terms

of differentiated products or services, or in offering
undifferentiated products at a lower price to customers.
¡ Companies are adding value in some way that makes

customers willing to pay. Where should the companies focus to
create value?
¡ Three major value configurations

¡ Value Chain
¡ Value Shop
¡ Value Networks
¡ James Thompson presented a typology of organization’s

technologies
¡ Long-linked
¡ Interdependence are sequential and tasks are accomplished
serially)
¡ E.g., Continuous process and Assembly lines
¡ Standardized, repetitive tasks
¡ Intensive
¡ Oriented towards solving highly specific problems
¡ E.g., Hospital providing services to patients, Movie Makers
¡ Mediating Technologies
¡ Standardized criteria for providing intermediary service, decision
making and scale of operations
¡ E.g., Banks
Source: James D. Thompson, Organizations in Action (New York: McGraw-Hill, 1967).

¡ Value Chain
¡ Interdependencies are sequential and tasks are accomplished serially.
¡ E.g., Continuous process and Assembly lines
¡ Effect of Internet
¡ Internet improves coordination between partners in the Chain
¡ Demand and Supply can both be well coordinated
¡ Increases geographical Scope and a geographically diverse audience
¡ Digital products can be downloaded thus saving on shipping costs
¡ Lowering of Inventory
¡ Disintermediation and reduction in vertical integration (e.g., Dell.com, Airlines)
¡ Enables much larger scale of operations (e.g., Amazon.com)
¡ Key
¡ In process efficiency (rather than product differentiation) and low cost
¡ Value Network
¡ Provides the service of a connection between two or more customers who wish
to be interdependent, such as borrowers and lenders (depositors) or buyers and
sellers.
¡ Facilitate the role of the intermediary service
¡ E.g., Online Travel Agents such as Travelocity and Expedia
¡ Allows scalability to serve 1000s of users at the same time
¡ Compounds network externalities
¡ Widens the geographic scope of the network
¡ Enables a larger scale of the network
¡ Key
¡ Important to increase and widen the network. Focus on network promotion and
contract management
¡ There is value in being part of the network that the intermediary controls or
supports.
¡ Value Shop
¡ Oriented toward solving highly specific problems.
¡ Intensive interaction between the problem solvers and the object of their
attention
¡ Based on most types of service provisions, such as doctor’s service in a clinic,
Restaurant etc.
¡ Enables larger scale of operations and widens the geographic Scope
¡ Allows more information to be collected and processed by the service provider
¡ Enables a new delivery medium or mechanism
¡ Reduces competency by providing the general knowledge base for the value
shop firm
¡ Key
¡ Getting basic information back to customers without the intervention of customer
service agent in a timely and cost-efficient fashion. E.g., Airlines reservation
system, ticketing systems
¡ Increasingly provide value on the basic services, such as Flight status, Airplane
layouts, Seat locations.
Value Matrix
Source: Kuchi Sanchita, Sumeet Gupta, “Value Mapping of E-Commerce Business Models,” Proceedings of the Forty-First International Conference on
Information Systems, ICIS 2020, 13-16 Dec., 2020, Hyderabad, India.

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Analyzing Internet

¡ Taxonomy of Business Model

¡ Apprising the Profitability Potential of a Business Model

¡ Who Profits from an Innovation

¡ Value Configurations and the Internet

¡ Revenue-collection approach (e.g., subscription, “razor and

¡ Value-adding approach (e.g., matchmaking, “long tail”

¡ Broad industry sector (e.g., professional services, packaged

¡ Strategic positioning within an industry (e.g., software-as-a-

Commission Fees levied on Travelocity, IndiaMart, Groupon, Volume / Expensive Transactions

Referral / Affiliate Fees for referring Autobytel Short lived models

¡ Fees levied on transactions based on the size of the transaction

¡ End users subsidized by Advertising, Charges fees for banners,

Generalized Portal Large and

Advertising takes different forms and sometimes forced (interstitial)

Infomediary Registration Model that the

Recommender System that the

Community Provider / Virtual Comm.

¡ Value added in Sales, Usually either wholesaler or retailer

Catalogue Merchant also sells and

¡ Apple’s itunes Store

¡ Value added in Production through Economies of Scale

¡ Sail’s e-procurement (metaljunction.com)

Networked utility Provider between a user

¡ Adobe Online Form’s

¡ Fees for Steering Visitors to a Business. Affiliate revenue is

Lead Generator the data to

¡ Fees for Unlimited Use

ISP / OSPs services

Content Creators on Subscription

¡ Wall Street Journal

¡ Fees for Metered Service

Service Provider Internet

B2B Service Provider to other

Value Chain Service Provider chain

Value Chain Integrator the value chain

Collaboration Platform Providers platform and sell

Application Service Providers

Fee-for-Service Based Models information on

¡ DoubleClick Acquired by Google

¡ Commission Based - Volume / Expensive Transactions

¡ Value - Adaptability - Rareness – Inimitability – Monetization

¡ Dynamic Capabilities View (Agility)

Source: Afuah, A. (2014),

¡ Value (Quality of Resources and Activities)

¡ Adaptability (Resources / Capabilities of a firm)

¡ Rareness (How Rare is the Value provided by the firm?)

¡ Monetization (Setting the Price Right)

¡ Proposed by Prof. David Teece, Univ. of California at Berkeley

¡ He argued that to make money from an invention or discovery,

¡ Capabilities for profiting from an innovation

Determining One’s Complementary Assets

¡ Second, the firm should understand its value configuration (value

¡ Sometimes capabilities can be handicap

¡ Companies are mainly concerned with creating value in terms

¡ Companies are adding value in some way that makes

¡ Three major value configurations

¡ James Thompson presented a typology of organization’s

Source: James D. Thompson, Organizations in Action (New York: McGraw-Hill, 1967).