E-Commerce Revenue Models

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  • 0:02 E-Commerce Revenue…
  • 0:32 Five Common Models
  • 3:45 Lesson Summary
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Lesson Transcript
Instructor: Tara Schofield
You have decided to start an online business. Now, you must consider how you will earn money from your site. This lesson will discuss five common revenue models that will help your e-commerce site earn more.

E-Commerce Revenue Models Defined

Selling products online can be a profitable business. As e-commerce has developed, many options have emerged for creating revenue online. An e-commerce revenue model is a plan for generating revenue for an online business. While e-commerce revenue models share many similarities with brick-and-mortar businesses, they also enable you to reach customers around the globe and offer more diverse methods of generating sales. These models can be helpful in determining how to structure your e-commerce business.

Five Common Models

While there are many ways to earn money online, you may want to consider these five common e-commerce revenue models when planning your business.

1. Affiliate marketing enables you to earn revenue by marketing or offering another product for sale on your site. For example, you may reference a book you read and recommend your customers get a copy for themselves. You could also set up an affiliate account and place a direct link to the book on the Amazon site, which will pay you a percentage of the sale. If you decide to participate in affiliate marketing, you'll need to research which companies might provide you with a financial incentive for promoting their sites on your page.

When you're just starting out, the money you earn from affiliate marketing may be just a small, supplemental amount. However, as traffic to your site increases, you may enjoy more substantial income.

2. Online advertising is a very popular revenue model for e-commerce businesses. In this method, companies or organizations buy advertising space on your site, provide a designed ad or written message, and then pay you for promoting their messages. Media sites, such as magazines, newspapers, and television channels typically use online advertising.

Two common types of online advertising include pay-per-click and pay-per-view, which determine how much advertisers will pay for their advertisements. While some sites charge a set fee for placing an ad, most pay a set fee for each person who clicks on a link or views a page related to the advertiser. As traffic to your site grows and more people click on an advertiser's link or view a related page, you'll earn more advertising revenue.

3. Transaction fees are the charges a company pays for using their service. If you've ever sold anything on eBay, you know there's a set price for posting a product for sale. Each time a transaction happens, you pay a small fee to eBay for marketing your product. Whether you charge a small fee for a company to list a transaction or for someone to view a video, transaction fees can be sizable if the traffic to the website is substantial.

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