What is Business Model?

Business models are perhaps the most discussed and least understood aspect of the web. There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means. As part of the businessbusinessbusiness modelmodelmodel, there is a need to address internal factors that relate to the ongoing operation of the company. This will involve defining the departments and divisions within the company, along with the procedures that govern the creation of positions and job responsibilities within each department. Management of all the departments is also an important component of the businessbusinessbusiness modelmodelmodel, as is the definitions of the responsibilities of the executives within the organization. BusinessBusinessBusiness operations such as manufacturing facilities, defining the production process, and allowing for the labor needs to produce the products are also part of the businessbusinessbusiness modelmodelmodel.

External factors also are part of a comprehensive businessbusinessbusiness modelmodelmodel. Chief among these elements is defining the target consumer audience for the goods and services produced by the corporation. This one single element of identifying the target audience will influence the form and function of both the marketing and sales efforts of the company, which in turn will impact the overall cost to produce each unit of a product. The businessbusinessbusiness modelmodelmodel will take this information into consideration and set retail pricing that will allow the company to operate at a profit, assuming a certain level of sales is realized consistently.


BusinessBusinessBusiness operations, sales and marketing concerns and forecasts, labor costs, and organizational structure are all essential components of the businessbusinessbusiness modelmodelmodel. Operating with a comprehensive modelmodelmodel helps a company to maintain focus on a core mission, while periodic reviews and updates help to keep the businessbusinessbusiness modelmodelmodel relevant to current economic conditions and consumer demands.


In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Other models can be more intricately woven. Broadcasting is a good example. Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.

Internet commerce will give rise to new kinds of business models. That much is certain. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.

Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.

The basic categories of business models discussed in the table below include:

Brokerage
Advertising
Infomediary The end-user has free access to the main product/service. An additional, optional charge is made for related ‘added value’ products/services, e.g. documentation, support, commercial versions, related iPhone or Android application, etc
Merchant
Manufacturer (Direct) One or more third-parties place clearly defined adverts within the website/application. Variations of adverts include graphical banners, text, inline, pop-over, interstitial, etc. Normally charged by cost per click, cost per action, or cost per thousand impressions.
Affiliate
Community
Subscription
Utility
The models are implemented in a variety of ways, as described below with examples. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.
That is an excellent idea. You may want to suggest a topic to wiseGEEK that is related to e-business, perhaps a question about how to market an e-business, challenges of starting up an e-business, etc. I bet a lot of people would be interested in the topic you submit. Make sure to check the database of all current wiseGEEK articles first to see if your topic is already covered.

Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But what is new and novel as a business model is not always clear. Some of the more noteworthy patents may be challenged in the courts.

Business models are perhaps the most discussed and least understood aspect of the web. There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means. As part of the businessbusinessbusiness modelmodelmodel, there is a need to address internal factors that relate to the ongoing operation of the company. This will involve defining the departments and divisions within the company, along with the procedures that govern the creation of positions and job responsibilities within each department. Management of all the departments is also an important component of the businessbusinessbusiness modelmodelmodel, as is the definitions of the responsibilities of the executives within the organization. BusinessBusinessBusiness operations such as manufacturing facilities, defining the production process, and allowing for the labor needs to produce the products are also part of the businessbusinessbusiness modelmodelmodel.

External factors also are part of a comprehensive businessbusinessbusiness modelmodelmodel. Chief among these elements is defining the target consumer audience for the goods and services produced by the corporation. This one single element of identifying the target audience will influence the form and function of both the marketing and sales efforts of the company, which in turn will impact the overall cost to produce each unit of a product. The businessbusinessbusiness modelmodelmodel will take this information into consideration and set retail pricing that will allow the company to operate at a profit, assuming a certain level of sales is realized consistently.


BusinessBusinessBusiness operations, sales and marketing concerns and forecasts, labor costs, and organizational structure are all essential components of the businessbusinessbusiness modelmodelmodel. Operating with a comprehensive modelmodelmodel helps a company to maintain focus on a core mission, while periodic reviews and updates help to keep the businessbusinessbusiness modelmodelmodel relevant to current economic conditions and consumer demands.


In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Other models can be more intricately woven. Broadcasting is a good example. Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.

Internet commerce will give rise to new kinds of business models. That much is certain. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.

Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.

The basic categories of business models discussed in the table below include:

Brokerage
Advertising
Infomediary The end-user has free access to the main product/service. An additional, optional charge is made for related ‘added value’ products/services, e.g. documentation, support, commercial versions, related iPhone or Android application, etc
Merchant
Manufacturer (Direct) One or more third-parties place clearly defined adverts within the website/application. Variations of adverts include graphical banners, text, inline, pop-over, interstitial, etc. Normally charged by cost per click, cost per action, or cost per thousand impressions.
Affiliate
Community
Subscription
Utility
The models are implemented in a variety of ways, as described below with examples. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.
That is an excellent idea. You may want to suggest a topic to wiseGEEK that is related to e-business, perhaps a question about how to market an e-business, challenges of starting up an e-business, etc. I bet a lot of people would be interested in the topic you submit. Make sure to check the database of all current wiseGEEK articles first to see if your topic is already covered.

Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But what is new and novel as a business model is not always clear. Some of the more noteworthy patents may be challenged in the courts.