Revenue Models of Google, eBay, Amazon

Revenue model is a description of how the organization will earn revenue, produce profits, and produce a superior return on invested capital. 5 major revenue models nowadays are sales, transaction fees, subscription fees, advertising fees, and affiliate fees revenue model.

Google

Google has multiple revenue models. One of the revenue models be used is advertising revenue model such as Google AdWords and Google AdSense. Google AdWords is pay per click advertising program of Google designed to allow the advertisers to present advertisement to people are looking for information related to what the advertiser has to offer. Google generate most of the revenue from Google AdWords. As you can see from the figure, AdWords also generates affiliates fee for Google which allow company receives commissions for referring customers to others web sites.

Google AdSense is another ad serving program run by Google. Website owners can enroll in the program to enable text and video advertisements. Advertisers are required to pay Google a fee for each time a user clicks on the advertisement. Froogle is a price engine website launched by Google Inc. It is a service from Google that makes it easy to find information about products for sale online. Besides AdWords, AdSense and Froogle, Google is currently testing a new advertising program which called Cost-Per-Action. This program pays site owners based on a Cost-Per-Click model.

eBay

eBay does not have inventory like Amazon.com. It only provides technology platforms and tools for e-commerce. eBay popularized the auction format listing. 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 generated its revenue through transaction fees by using online auction business model. It earns transaction fee from owning PayPal or an online paying service system for users to buy items online more conveniently. eBay also gains sales from the service of listing customer’s product to be sold to other users as well as some advertisement fee. eBay generated overall revenue around $6 billion from its three primary business: auctions, payments (PayPal) and communication (Skype).

Amazon.com

Amazon generates revenue primarily by selling books, videos, electronics, and kitchen equipment on domestic and international Web sites, such as Amazon Marketplace. Amazon Marketplace allows sellers to offer their goods alongside Amazon’s offerings. Buyers can buy new and used items sold directly by a third party through Amazon.com using Amazon Marketplace. This sales strategy and program has been very profitable for Amazon.com. Amazon.com uses similar revenue model to eBay, they also offer items listing to be sold online. Amazon.com generates revenue from commissions from suppliers when there is a sale of product. In their main websites, there are few advertisement displays in the page where users browsing through some items. Moreover, Amazon.com also generates revenue by Affiliate revenue model. Amazon was one of the first online businesses to set up an affiliate marketing program. AStore is an Amazon.com affiliate product which website owners can use to create an online store on their site. The store does not allow website owners to sell their own products directly.