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This chapter is from the book

Organization of the Book

Overall, this book is designed to provide a framework for how to understand and cope with the many issues that arise in building and sustaining an electronic commerce business by examining prevalent business models on the Internet. More specifically, the intent is to provide details about ways to build business models that can then be pieced together in a building-block fashion to construct, understand, and analyze complex business relationships in the new world of electronic commerce.

In the early chapters we set up a framework that establishes benchmarks you might use as the starting point for evaluations. The middle chapters focus on key concepts of electronic commerce such as customer acquisition and product pricing. Finally, there is a trial analysis of a sample company we call Ebiztro.com to show how all can be brought together.

Assembling these units into a cohesive view of an enterprise is achieved by defining the online business model in terms of four horizontal stacks and one vertical stack. The four horizontal stacks are platform, content, community, and commerce, as described in Chapter 2, "The Five Stack E-Commerce Model," and illustrated in Figure 1.3. The vertical stack is services, which provides value for each of the horizontal stacks. Metrics and examples to illustrate what we refer to as atomic business models are provided wherever possible.

Services are vertical because they can be introduced into every horizontal stack, usually when a make versus buy decision point is at hand. Services are pervasive throughout the new economy, and they potentially touch every enterprise that uses online processes and technologies. Integrating services and service providers shortens time to market and often reduces capital costs.

Figure 1.3 The E-Commerce Stack

There are other benefits as well as trade-offs for implementing outside resources. We touch on them in the remaining eight chapters as appropriate.

Chapter 2, "The Five Stack E-Commerce Model," looks closer at the model and identifies value in each part of the stack and the role that it plays in the big picture. In this chapter, we present a complete profile of the online company and the supporting elements it does and can use.

Chapter 3, "The Internet Platform," takes a comprehensive look at the Internet Platform in greater detail, listing and integrating the many hardware, network, and software components associated with an e-commerce enterprise. The Internet Platform consists of many technologies and technologically-based service providers, each of which also has a different business model. Make versus buy decisions exist at every node in this platform.

Chapter 4, "The Content Stack," looks at the nature of content—its source, aggregation, categorization, and distribution to users. In a very fundamental sense, the Internet is a vehicle for the intelligent movement of content. There are three types of content, each with a different reason and role in the online community. Content can be static, dynamic, or interactive, and some merchants integrate all three at one time or another into their sites.

Chapter 5, "The Community Stack," provides perspectives on community evolution and structure for B2C and B2B environments. Online sites bring people together into virtual communities. These virtual communities have tremendous economic potential for merchants, but coalescing users into a community requires perhaps more patience than working with other stack elements.

Chapter 6, "The Commerce Stack," focuses on e-commerce and lays out the business models under the categorization of stores, marketplaces, and ecosystems. This classification encompasses both B2C and B2B environments. Also provided is a discussion of the hybrid store of the future.

Chapter 7, "Pricing Models on the Web," complements Chapter 6 with a detailed look at pricing models that are made possible on the Internet and their applicability to different e-commerce contexts. With new pricing models there are also many new transaction mechanisms that allow merchants to shape an accurate pricing strategy. Metrics in this area can be very precise.

Chapter 8, "Customer Acquisition Models for E-Commerce," analyzes customer acquisition models and provides a graphic example of the pitfalls of e-commerce marketing. Permission marketing and banner ads are two marketing techniques unique to the online world, and an extensive analysis is included that uses several metric tools. Often overlooked is the power of the brand and correctly assembling resources to begin the branding process.

Chapter 9, "Application of Business Models," assembles the components of the puzzle and establishes the methodology for constructing more complex business models. A complete e-commerce store, Ebiztro.com, is modeled using the techniques of the book and illustrates the learning that comes from usage of business models, metrics, assumptions, and analysis.

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