An introduction to e-commerce and distributed applications
2 Commerce and the internet
There are a number of ways in which companies can make money from the internet. Probably the best known way of making money is by selling some commodity; this could be a non-IT commodity such as a CD or item of clothing or it could be some piece of application software, a font, a browser plug-in or an operating system. Other forms of revenue raising are:
- Auction sites which auction items on the internet and make profits by taking some commission from the sales.
- Affiliate sites which contain a link to a normal retailing site and are paid when a visitor from the affiliate site makes a visit to the retail site to make a purchase. The affiliate site will usually attract visitors by offering some information such as providing links to resources and tutorials on some specific topic or technology such as Java.
- Banner adverts. These adverts will contain links to the company doing the advertising; they will be displayed on a site and will result in some revenue being earned by the site owner when the banner advert is clicked.
- Bulk-buying sites where a site collects a number of users together all of whom want to buy some item; the site negotiates a discount with the supplier and takes a commission.
- Shopping malls where a number of e-commerce sellers congregate together on the same website; often these sellers will be related to each other, for example they may all sell luxury goods. The mall owner takes a percentage of their profit.
- Portals which contain massive amounts of material on a particular topic, for example a portal devoted to fishing. Such sites will contain thousands of resource links, tutorials and indexes. They will also contain links to merchants who sell goods associated with the portal topic. There may be a number of ways that the portal owner would make money, for example they could be paid by a merchant for each visit from the portal or the merchant may pay a flat fee for being included in the portal.
- Digital publishing sites which are effectively magazines on the web. They make profits in a number of ways including advertising and charging vendors for references to their website.
- Licensing sites which make some software available to other sites, for example search engines which allow a visitor to the site to search for material more easily.
- Community sites. These are like portals but involve the visitors more, for example a community site devoted to nurses might include a number of chat rooms which allow nurses to talk together in real time and swap advice. Money is made from such sites in the same way as with portals.
- Name-your-price sites are websites where the buyer haggles with the retailer and names what price they will pay for a particular product. Such sites make profits in the same way as normal retail sites.
Such applications have changed the face of retailing, for example the fast communication of the internet has made bulk buying sites feasible and popular and has given rise to a number of novel commercial models. The most popular model is one which involves a pyramid of services, ranging from those that are free, to those which are charged at a premium rate. For example, a site which sells a piece of software might give the basic software away for free and then offer increasingly more sophisticated versions of the software to buyers. This form of partially free charging has percolated down from the internet to conventional software sales; for example, the company Qualcomm that markets the Eudora email reader makes a version of the program available for no cost, but will charge for fully featured versions.