Revenue model for Google, Amazon.com and eBay

There are billions of websites on the internet. But among these, how many websites actually make money. There is a revenue model that describes how the organization will generate revenue. The major revenue models are sales, transaction fee, advertising, subscription, affiliate and others revenue model.

Google is widely recognized as the world's largest search engine. It is an easy-to-use free service that provides ways to access all this information. Google generates most of the revenue from Google AdWords, Pay per Click Advertising, Google AdSense, Froogle, GoogleAnswers and their latest advertising program which is Cost per Click model. Now, we just focus on the most two common function of Google:

• Google AdWords is pay per click advertising program. It designed to allow the advertisers to place targeted text-based and display ads on Google web sites and Google Network members’ web sites to people, who are looking for information related to what the advertiser has to offer. Google’s text ads are short, consisting of one title line and two content text lines. When a user searches Google's search engine, ads for relevant words are shown as "sponsored link" on the right side of the screen, and sometimes above the main search results. AdWords advertisers pay Google either based on cost-per-click basis, or cost-per-impression basis.

• Google AdSense is an online program, where Google distribute advertisers’ AdWords ads for display on the web sites of Google Network members. These ads can generate revenue on either a cost-per-click or cost-per-thousand-impressions basis. AdSense has become a popular method of placing advertising on a website because the ads are less intrusive than most banners, and the content of the ads is often relevant to the website.

Amazon.com is one of successful website that used e-commerce model, where the website sells products or services online. Amazon.com started as an on-line bookstore, and soon diversified into many product lines. Amazon generates revenue primarily by selling books, music, videos, electronics, apparel, and kitchen equipment on domestic. Amazon.com successfully earned distributed transaction fees which are fixed at price through creating virtual marketplace. Moreover, Amazon.com also generates revenue by Affiliate revenue model.Amazon.com is pioneer in affiliate partnership marketing, where uses affiliations with other websites to generate revenue. An Amazon partner website itself may not sell any product or service, but helps in promoting the product. In turn, website owner earns referral fees (commission) on the products purchased by customers. The fee structure is currently the same as for the other affiliate links and ranges from 4% to 10% of the product price.

Ebay is the world's largest auction online marketplace - where practically anyone can sell and bit for practically anything at any time. Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. Ebay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services. Ebay generates revenue from a number of fees, such as insertion fees, promotional fees, and final value fees. Insertion fees are charged for any item that is listed on Ebay, the fees is nonrefundable, promotional fees are charged for extra listed options that attract attention for an item, while for final value fees are a commission at the end of the auction that is charged to seller. It also earns transaction fee from paypal (Acquired by eBay Inc. in October 2002), an online paying service system for users to buy items online more conveniently as well as advertising fees.

Google, Amazon, and eBay, are few of the most successful e-commerce model that implement different type of revenue model. As we can see that Google earn advertising fee from their advertiser. Whereas Amazon.com’s revenue come from sales throughout their website and collect affiliate fees for referring customers. As for Ebay charged transaction fee on those products listed on their website as well as commissions on any completed auction transaction.

By Qiao Ling